The Morning Download: The AI Empire Strikes Back

What's up: OpenAI IPO? “Not on the cards” yet; Humanoids meet the home; A new quantum computer; Not all the bubble talk in Napa Valley had to do with the sparkling wine.

Good morning. After months of talk about an AI bubble, the AI titans aren’t having it anymore and they aren’t afraid to say so.

Leaders from OpenAI and CoreWeave pushed back Wednesday at the WSJ Tech Live conference against growing warnings that an AI investment bubble will implode, as well as concerns about the nature of deals among AI companies, the capacity of the world to keep funding trillion-dollar global infrastructure investments, or the idea that AI isn’t worth it.

OpenAI Chief Financial Officer Sarah Friar said the company’s business was growing and in robust health. Revenue is on track for $13 billion this year, up from $4 billion last year and $1 billion two years ago. That revenue growth needs to continue, given that OpenAI plans to spend more than $1.4 trillion on infrastructure.

Financing the build-out could be more difficult if it turns out that the usable life of leading-edge GPUs is shorter rather than longer, she said during a conversation with WSJ Technology and Media Editor Sarah Krouse.

“If the timeline on the chip stays short, that gets harder. And so this is where we're looking for an ecosystem of banks, private equity, maybe even…ways governments can come to bear,” Friar said.

Friar said the underlying business was strong, despite the fact that the company is losing money. And no, she said an OpenAI IPO isn’t on the cards for now.

“I'm not overly focused on a break-even moment today because I know that if I had to get to a break-even, I have a healthy enough margin structure that I could do that by pulling back on investment in the period,” Friar said.

Krouse observed that “it does feel though that in this moment, there's a lot of exuberance around AI.”

Friar said the exuberance was justified.

I don't know if there's enough exuberance about AI, when I look at the actual practical implications and what it can do for individuals. We talked about it earlier, that mom with the diabetic kid who's at her wit's end about what to make for dinner tonight, right? Chat just changes the whole paradigm because of…the ideas that you get, the ability to photograph your fridge and immediately have a menu plan…A cancer patient can get maybe drugs that…we never thought of before, but a model was able to kind of come up with a new molecular compound and a distribution mechanism that gets it…through FDA approval multiples times faster than we could even imagine. So the exuberance I think is real, and we should keep running at it.

News Corp, owner of The Wall Street Journal, has a content-licensing partnership with OpenAI.

CoreWeave co-founder and Chief Executive Michael Intrator addressed concerns about an AI bubble and the relationships among AI companies including CoreWeave and Nvidia.

CoreWeave’s cloud provides access to Nvidia’s leading AI systems. Nvidia owns about 6% of CoreWeave shares. The WSJ notes that the company tripled revenue in the quarter ended June 30 to $1.2 billion and that its market cap has almost tripled since it went public earlier this year. CoreWeave also has financed its growth with debt, including a $7.5 billion raise last year, one of the largest-ever private debt financings.

Is it a bubble? Intrator says no.

It's very hard for me to worry about a bubble when, you know, as one of the narratives, when you have buyers of infrastructure that are changing the economics of their company. They're building the future…Nobody can do it all. And so you're working together to try and deliver size and scale of infrastructure that the world has never seen before. It stands to reason that you're going to have companies working together, investing together, driving different parts of this market together.

And the New York trader offered equity-loving Silicon Valley a different perspective on debt, the fuel on which much of the economy actually runs.

I mean, that's the nature of the business, right? Like we are building infrastructure, delivering infrastructure. The way that we built our business and we're able to scale our business to such enormous scale so quickly is that we used debt, because debt is the correct way to do this. I realize I'm in Silicon Valley and maybe that doesn't get as much traction as it does in New York, but that is the right way to do this, right? Like when you think about other infrastructure builds that have occurred throughout history, you use debt.

How do you think the AI boom will end? Use the links at the end of this newsletter and let us know.

More Wednesday highlights from WSJ Tech Live California below.

Are humanoid robots ready to be the new home help? Bernt Børnich, founder and CEO of humanoid robot maker 1X sat down with WSJ tech columnist Joanna Stern to discuss the privacy trade-offs, autonomy challenges and usefulness of living with a robot. But before any of that, any worthwhile home robot needs to know how to close the dishwasher door.

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