OpenAI – Brain Drain

How this is worth $150bn is beyond me.

• It is said that a company is more than just one man but when almost all of the brains of the company are no longer there, one has to wonder what this means for product launches, revenues and of course, value.
• In a tweet clearly drafted by a lawyer, Mira Murati, CTO of OpenAI has announced that she is leaving the company which in my opinion is a heavy blow to OpenAI.
• This is because she was the brains of the operation and the additional departure of Chief Research Officer, Bob McGrew and Barret Zoph, VP of research compounds my concerns even further.
• Furthermore, despite plenty of hyperbolic commentary, GPT-5 is nowhere to be seen, and Sora (video generation) still has not shipped despite being demonstrated in February of this year.
• There are two possibilities for these departures.
  • First, Start-up where Mira and her colleagues found their own company and create a competing product.
  • This is happening with increasing frequency and there are now many start-ups headlining with alumni from OpenAI and Deep Mind.
  • Given how important Mira was to OpenAI and how frothy the market is, I suspect that she will have no difficulty raising money for her new venture if that is the path she has chosen to take.
  • Second, disagreement: which has also been fairly common where founders reach an impasse on the direction that the company should take and part ways.
  • Ilya Sutskever, one of the other main founders of OpenAI also recently left for this exact reason and has started his own company focusing on AI safety as this is where his opinions and those of Sam Altman diverged.
• On top of the fundamental implications of Murati’s departure, the timing could not be worse.
• OpenAI is currently raising money at a pre-money valuation of $150bn putting the company on 30x 2025 revenues in an optimistic scenario.
• This assumes that the company will become a proper for-profit (highly likely in my view see here) and that revenues grow very quickly and that fat profits will follow.
• With the brains of the operation gone and possibly gearing up to compete with OpenAI directly and rapid growth in competing offerings, this proposition is becoming more fanciful with every passing event.
• OpenAI is no longer miles ahead of the competition and with Meta’s party-blowing release of its flagship model and its weights into the open-source community, the stage is set for rapid price erosion.
• There are already signs of this as more features are making their way into free generative AI services, but it is not until prices begin to fall that anyone will notice.
• This is the pin that bursts the bubble in my opinion and given how much it has been inflated, there will be a significant correction to reality.
• This is why I remain very nervous about the valuations that are being paid for these companies and am staying well away from them.
• If I were forced to invest in this area, it would be Nvidia which actually has revenues and profits now or Qualcomm which is in a very good position to benefit as generative AI starts to be implemented at the edge.
• I already own Qualcomm which remains reasonably valued and has further upside from its position in automotive as well as the potential to take share from Intel and AMD in laptop processors.