VIDEO: Our Take on the Latest OpenAI IPO News

Chris Versace weighs in on reports that OpenAI may push out its planned IPO into 2027 from the second half of 2026, noting that it is only a matter of time before the company goes public. In his view, continued AI adoption and expanding usage will continue to fuel the AI arms race between OpenAI, Anthropic, Alphabet (GOOGL) and others.

He also questions why the market is overlooking the big spending news from Samsung (SSNLF) and SK Hynix. He also checks in on Microsoft (MSFT) shares following their recent steep decline and explains why we see an opportunity for Pro Portfolio members who are underweight the stock.

Transcript

Hey friends, Christopher Versace here, Friday, June 26th, counting down the week, counting down the month of June, and yes, counting down the second quarter. But we’ll talk a little more about that in the weekly roundup out later today, and of course the upcoming June monthly roundup. But today, I wanted to spend a little bit of time about one of the factors that’s really weighing on the market today, and that is word OpenAI may punt its IPO until 2027.

Now, as you can imagine, I have a few thoughts on that. I mean, you know, we see IPOs get filed, we see the timing move around, jostled around from time to time, subject to developments at the company, subject to what’s going on in the marketplace. And if you remember, there’s been a lot of conversation about the timing for the OpenAI report.

With the speculation being that it was likely to come sometime in the second half of this year, potentially on the heels of the anthropic IPO. This is all part of the chatter for a very robust, very vibrant IPO market in the second half of the year. And you know, odds are we’re still going to see an uptick in fees just given the size and number of transactions that are happening. That’s what keeps us bullish on the shares of Morgan Stanley and Bank of America.

You know, I do think though that you know we do have to assess what’s going on in the market because as we know, the market’s a living, breathing thing, and things can change. In this instance, one of the things we’ve been talking with you about when it comes to the IPO market is watching not only the pricing of IPOs, but how they trade after the transaction is completed, or what’s you know, some will refer to as the aftermarket, aftermarket trading. When we take a look at what’s happening with SpaceX, more importantly, when we take a look at what’s happening with Cerebras, that IPO, which has broken the IPO pricing, and it was a very oversubscribed IPO, we can understand that there is likely to be some rethinking or some potential hesitation.

I’m not going to be cynical and say, geez, the investment bankers probably want to spread all these massive fees out over two years, which would be good for their bonuses and arguably good for the profits and earnings at their firms. Could be, but we’re not going to go there. Rather, I think that they’re trying to assess whether or not this is a tech-related issue, whether or not this is a market-related issue, and you know, the timing as a result could shift around a little bit. Remember, we’re not so much worried about what particular month a transaction might fall in. More likely, what is the quarter it will happen in, because that can affect quarterly investment banking revenues. And given the leverage in those businesses, bottom line results for any particular quarter. I would also share that just right now we’re seeing speculation that the IPO for open and I could be pushed out.

If the market heats up, IPO activity is robust, we could see that be pulled forward. So we’re going to assume that at some point OpenAI does become a publicly traded entity. And the simple reason for that is that there is simply too much invested capital in the company. It’s not going to get sold. It is not going to remain private. At some point, those big institutional investor money dollars will need to come out because those folks will need to show returns on their investments. So it to me it’s just a matter of timing. But here’s the other thing. We continue to see numerous signs of a of increasing AI adoption and expanding usage. You’ve heard me talk about this quite a bit, but you know, as you’ll see in our signals alert tomorrow, it continues.

My thinking here is that so long as we remain in this AI-driven arms race, which is going to be fueled by continued efforts to tap and win market share from that AI adoption expanding usage I just mentioned, we are going to see open AI continue to invest in its business as it looks to combat what Google, Anthropic, and others are doing. Odds are that means we are going to see more spending in the back half of the year by open AI. And remember, capacity across a number of different areas, chips, particularly for memory, remain tight. So it’s another reason to think that we are likely to see some tie-ups and continued spending as these companies continue to add capacity. Now, does that mean that the pressure we’re seeing in some of the Portfolio’s AI and digital infrastructure companies today are warranted? I think it’s more of a knee-jerk reaction to the headlines that we’re seeing.

What we need to do as investors, and you won’t be surprised when I say this, is that we need to look past the headlines, the emotion. We need to focus in on the data, the details, and the signals. By doing that, we can avoid some of the emotional reaction that we’re seeing in the marketplace. We can avoid the herd think that could potentially and most likely lead us down the wrong path.

You know, we want to focus on what’s unfolding. What I’m surprised is that not more attention is being paid to some of the things we shared with you in this morning’s opening comments. And I’m referring to you about the hundreds of billions of dollars that Samsung and SK Heinex plan to spend over the next several years on AI data center capacity and chip capacity. Maybe some folks are waiting for the formal announcement, say, like the one from Samsung that’s expected to come up.

But again, we’re going to continue to follow the data, the details, and other signals. I think a great example of that is what we published yesterday and today regarding Boeing. If you missed those alerts, please be sure to check them out.

And I also want to say a couple of words on Microsoft. I know we had a lot of folks asking about Palantir, what are we doing with Palantir? Well, we published our game plan yesterday. We added to the Portfolio’s position yesterday. And I’m happy to say that it appears that Michael Burry has covered his short position in Palantir. I think that’s gonna take some of the pressure off. But now let’s take a look at Microsoft or at least share a quick word on Microsoft. And I would start by saying that please remember the company is very different today than it was 10, 20 years ago, right?

Cloud and related infrastructure are the primary drivers for the company, not PC sales, not tablets, or even Xbox. Microsoft is the second largest cloud provider behind AWS, and expectations are that business will grow 39% in the current quarter. We also heard from Broadcom that it will start shipping chips developed with OpenAI to Microsoft sometime in the second half of this year, which means more capacity is coming on stream. As that capacity comes on stream, Microsoft should be in a better position to monetize its remaining performance obligations or RPOs that hit $627 billion at the end of the March quarter. And yes, a hefty amount of that is the big chunk from OpenAI. But again, we know more capacity for OpenAI is coming into Microsoft.

That should allow it to chew through that part of its IPO and start monetizing it. That should be a good thing for the cloud business and for the margins over the coming quarters. now I will also say that we have seen a big pullback in Microsoft. We do like the improving technical setup that we’re seeing, particularly on the MacD line. And I would say that for folks that are underweight Microsoft shares, we like what we’re seeing in the chart. And this is a good pickup point, in my opinion. And yes, we’ve been on the sidelines with Microsoft for some time with the Portfolio. And what we’re seeing could prompt some action by the Portfolio potentially sooner than later. With that, my friends, I would say please be sure to keep an eye on your emails in case we make any moves with the Portfolio. Remember, we did make a move with Palantir yesterday.

I would also say that you want to keep your eyes on your emails because later today we do have the Weekly Roundup coming at you. And tomorrow we have another signals alert. And finally, before I get out of here, just a couple things on the housekeeping front. We will be publishing the July Monthly Roundup next week. Most likely it’ll fall either Wednesday or Thursday. Remember, the month and the quarter close on Tuesday. So again, the July Monthly Roundup will likely be out either Wednesday or Thursday before we break, like everybody else, for the July 4th holiday weekend.

One other point I will be heading to London for some family business, leaving the night of June 2nd. No obvious impacts given the market is going to be closed on Monday on Friday, July 3rd, but I’m not returning until Wednesday, June 7th, sometime in the afternoon, which means that I will be keeping an eye on things, but the volume of comments and alerts, it’s going to be a little less than usual. Bear with me, if anything meaningful happens either in the market or with the Portfolio, we will have comments. But just giving you a little heads up on that.

And with that, my friends, have a great weekend. And I’ll see you back here on Monday.

More Pro Portfolio:

At the time of publication, TheStreet Pro Portfolio was long GOOGL and MSFT.