A look at OpenAI's historic week of announcements amid simmering AI bubble concerns

[Artificial Intelligence AI Assistant Apps - ChatGPT, Meta AI, Gemini]
Fritz Jorgensen

Microsoft-backed (NASDAQ:MSFT [https://seekingalpha.com/symbol/MSFT]) OpenAI this week cemented its place as one of the leaders of the artificial intelligence (AI) industry with a series of announcements unveiling new or expanded partnerships with Nvidia (NVDA [https://seekingalpha.com/symbol/NVDA]), Oracle (ORCL [https://seekingalpha.com/symbol/ORCL]), SoftBank (OTCPK:SFTBY [https://seekingalpha.com/symbol/SFTBY])(OTCPK:SFTBF [https://seekingalpha.com/symbol/SFTBF]), CoreWeave (CRWV [https://seekingalpha.com/symbol/CRWV]), and Databricks.

OpenAI's plans come at a time when there are concerns over stocks being in a bubble, partly due to the AI craze, which has led to stratospheric valuations for some tech companies. OpenAI's announcements prompted at least one analyst to call it "one of the most impressive cases of 'fake it till you make it' from Silicon Valley."

OpenAI's historic week was kicked off on Monday after it said it would build and deploy at least 10 gigawatts of AI data centers with Nvidia (NVDA [https://seekingalpha.com/symbol/NVDA]) systems. As part of the deal, Nvidia (NVDA [https://seekingalpha.com/symbol/NVDA]) committed [https://seekingalpha.com/news/4497243-nvidia-plans-to-invest-up-to-100b-in-openai-progressively-to-build-ai-data-centers] to invest up to $100B in OpenAI progressively as each gigawatt is deployed.

"The Nvidia/OpenAI deal is another validation moment for the AI Revolution and the trillions ahead being spent. While there are worries about an 'AI Bubble' and stretched valuations we continue to view this as a 1996 Moment for the Tech World and NOT a 1999 Moment," weighed [https://seekingalpha.com/news/4497675-ai-revolution-hits-next-stage-of-growth-in-nvidia-openai-deal-wedbush] in Wedbush's Dan Ives, a well-known Wall Street tech bull.

Then, on Tuesday, OpenAI said it would expand [https://seekingalpha.com/news/4498161-openai-oracle-reveal-first-stargate-data-center-in-texas-report] its previously announced Stargate partnership with Oracle (ORCL [https://seekingalpha.com/symbol/ORCL]) and SoftBank (OTCPK:SFTBY [https://seekingalpha.com/symbol/SFTBY])(OTCPK:SFTBF [https://seekingalpha.com/symbol/SFTBF]) to add five new U.S. AI data centers, bringing the total commitment to nearly 7 gigawatts of planned capacity and over $400B in investment over the next three years.

Finally, on Thursday, AI hyperscaler CoreWeave (CRWV [https://seekingalpha.com/symbol/CRWV]) said it would expand its agreement with OpenAI by up to $6.5B, bringing [https://seekingalpha.com/news/4498936-coreweave-expands-contract-with-openai-by-up-to-65b] its total contract value with the ChatGPT developer up to about $22.4B. Separately, AI-powered data analytics startup Databricks announced a $100M partnership [https://seekingalpha.com/news/4498935-openai-databricks-unveil-multi-year-partnership-to-expand-usage-of-openais-models] with OpenAI.

"That's a well-worn tradition in Silicon Valley to make big promises and hope that you can fulfill them. And that's what OpenAI is doing here," Gil Luria, head of technology research at D.A. Davidson, told Yahoo Finance on Thursday.

"The likelihood that they will be able to live up to those commitments is quite low. Which is to say, it's not zero. ChatGPT does have a head start, it's very popular, it's very useful," he said.

"But they're betting that they can make all these compute commitments, secure that compute, and that will somehow crowd their competitors. Not sure that necessarily can be the case, since their competitors are Google (GOOG [https://seekingalpha.com/symbol/GOOG])(GOOGL [https://seekingalpha.com/symbol/GOOGL]), and Meta (META [https://seekingalpha.com/symbol/META]), and Anthropic, which is backed by Amazon (AMZN [https://seekingalpha.com/symbol/AMZN]), and Elon Musk's xAI. Also very well-funded enterprises," Luria said.

"While on the other hand, OpenAI now needs to go raise this $500B that they promised, and that's not trivial. Again, they may be able to do it, but for now it just looks like a 'fake it till you make it' situation," he added.

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