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OpenAI Nears Completion on Oversubscribed $6.5 Billion Funding Round
5-minute tech market update.
Kristoffer Lindström
September 20, 2024
MARKET
Market comment
Dow and S&P Surge Post Fed's Unexpected Interest Rate Cut
The Dow Jones and S&P 500 closed at record highs following a surprise 50 basis point cut in federal interest rates, exceeding the expected 25. Tech sectors saw the most significant increases, with a 3.1% jump. Conversely, applications for US unemployment insurance hit their lowest level since May. The Fed has indicated further rate cuts in 2024 to maintain labor market conditions.
Tech stocks on the move
Tech Stocks Soar as Federal Reserve Cuts Benchmark Interest Rate
Following the Federal Reserve's benchmark interest rate cut, tech stocks received substantial investor interest, with Tesla shares climbing 7.4% and Nvidia 4%. In addition, rival chipmakers Advanced Micro Devices and Broadcom also enjoyed gains.
TECH BRIEF
OpenAI's new o1-preview and o1-mini models have been made available to all ChatGPT Enterprise and ChatGPT Edu customers. The models, OpenAI's most advanced to date, imitate human thought processes, enabling them to solve complex problems. In initial tests, o1-preview solved 83% of problems in an International Mathematics Olympiad qualifying exam and ranked in the 89th percentile on Codeforces. The models promise significant advancements for businesses and educational institutions, enabling complex data analysis and problem-solving with advanced safety features.
In the Fintech sector, the concept of gross profit is evolving, driven by the diverse business models of fintech firms and their varying variable costs. Enterprise value creation now involves determining 'contribution profit', a term which aims to simplify understanding of the unique take on gross profit that applies to this sector. It moves beyond gross revenues to account for all variable expenses, revealing the true profitability of a fintech product. Various examples, including SoFi, illustrated how contribution profit varies across different business lines.
AI startup Hippocratic AI has secured an additional $17 million investment, with backing from Nvidia's venture capital arm, NVentures. This funding will facilitate the expansion of Hippocratic AI's generative AI healthcare agents, designed to enhance access to healthcare by emulating real-time patient interactions. NVentures' investment marks Nvidia's initial foray into healthcare that is not affiliated with biotech or pharma. Hippocratic AI's total funding has reached $137 million, pushing its valuation to $500 million.
The Verticalization of Everything predicts AI's future impact on vertical SaaS solutions. The wave of vertical SaaS innovation powered by AI will disrupt horizontal B2B SaaS companies, resulting in increased vertical-specific functionalities. AI will deepen the value in each vertical by optimizing industry-specific processes and unlocking large market niches. This disruption will likely lead to massive unbundling, offering a ripe opportunity for startups to create AI-based solutions that essentially behave like superstar employees in their respective fields.
Amazon has unveiled an AI-powered Video generator tool for advertisers to transform single product images into video showcases. According to Amazon Ads VP Jay Richman, the tool is currently beta testing with U.S. advertisers. In addition to Video generator, the company also announced Live Image, which produces short animated GIFs from still frames. These announcements arrive as competitors, including Google and Adobe, up their game in video-generating.
OpenAI's upcoming $6.5 billion funding round is oversubscribed, with investors such as Microsoft, Nvidia, and Apple expected to participate. The funding will value OpenAI at $150 billion, not including the new investment. Existing investor Thrive Capital is leading the round but Sequoia Capital will not participate.
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