The government shutdown has barely made a dent in the S&P 500’s record run.
The reason? AI, of course.
Today, OpenAI completed a deal to help its employees sell shares at a jaw-dropping $500 billion valuation, topping Elon Musk’s SpaceX (worth $400 billion) as the most valuable private company in the world. The deal was viewed by Wall Street as a vote of confidence that the AI rally in stocks has plenty of room to run.
The details: According to Bloomberg, employees sold about $6.6 billion worth of stock to a group of investors who valued OpenAI at far above its previous $300 billion price tag, which it reached in a SoftBank-led funding round earlier this year. The secondary share sale is intended to help OpenAI retain top employees amid an increasingly cutthroat talent war among tech bigshots, while also opening the door for more investors to get some skin in the company’s game.
To put OpenAI’s latest valuation in perspective, its market value is now on par with ExxonMobil, which reported revenue of about $350 billion last year and profit of over $30 billion. OpenAI, by comparison, is projecting a revenue figure of $13 billion this year and is losing billions, according to the Wall Street Journal.
OpenAI’s skyrocketing valuation had a major imprint on the public markets. Global chip stocks climbed today, particularly in Asia where CEO Sam Altman has been inking deals with South Korean chipmakers as part of the AI giant’s Stargate data center project.
Is the market overzealous about AI?
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The demand for the fresh batch of OpenAI stock, even at a valuation of $500 billion, illustrates how rabid the hype around AI has become. Despite sticky inflation, tariffs, and a rickety labor market, it seems the only thing investors are focusing on is making it rain for a narrow group of AI-focused tech companies.
But there remain a fair share of doubters about whether the rally can sustain itself. Tech giants are going to spend roughly $400 billion in 2025 on AI-related infrastructure, a gargantuan sum that some skeptics are doubtful will pay off, nevermind the question of whether they can afford it.
Bulls, however, argue that AI will be transformative on the scale of the invention of electricity, and say that fears of a bubble are overblown. After a brief pullback in AI enthusiasm last month due to a slew of bearish signs, it seems traders are back on the bandwagon.
“One AI bubble has already burst—the bubble in saying there’s a bubble,” explained Deutsche Bank analyst Adrian Cox, who cited Google Trends data showing a decline in people searching for the term “AI bubble” over the past month.—LB