OpenAI’s “Thinking” Model and $150B Valuation

TECH IN THE NEWS

Harris v Trump - While trading blows over China chip exports, Harris advocated investing in US tech to “win the race” on AI and quantum computing. Trump Media shares fell as the market prices in an increased chance of a Harris win.

Powering AI - US officials are set to meet with top tech execs to discuss the growing needs of AI infrastructure development in line with national goals.

Polaris Mission - A SpaceX engineer and a billionaire completed the world's first private spacewalk in orbit, wearing a new line of SpaceX spacesuits.

No Bull - Retail trading platform eToro will stop offering nearly all cryptocurrencies and pay $1.5M as part of a settlement with the SEC.

Antitrust Week - 1. The US antitrust case against Google over its ad tech business is underway. | 2. The EU antitrust regulator upheld Google’s 2017 online shopping monopoly decision, and hit Apple with $15b in Irish back taxes and fees.

DEALS TO WATCH

OpenAI is reportedly in talks to raise $7b at a $150b valuation led by Josh Kushner’s Thrive Capital joined by Microsoft, Apple, Nvidia and Emirati VC MGX. It also aims to secure a $5b credit from banks.

Palo Alto Enterprise AI Search startup Glean raised a $260M+ Series E at $4.6b led by Altimeter and DST Global, with SoftBank, IVP, Lightspeed and Sequoia joining.

🚨 TECH BUZZ ANNOUNCEMENT:

We’ve made some changes — Our Closed Deals, Companies to Watch, and Funding Buzz sections will now live in a separate email sent weekly on Monday morning.

Please get in touch with feedback on this or any other content suggestions.

Pre-IPO | The Biggest Disruption to $martphones Since iPhone

• Turning Smartphones into Revenue for Users.

• 32,481% Growth in 3 Years.

• Over $60M+ in Revenue. $1T+ Market Opportunity.

Invest Today

This is a paid advertisement for Mode Mobile Reg A offering. Please read the offering statement at https://invest.modemobile.com/.

THE HOTTEST THING IN TECH
OpenAI’s “Thinking” Model and $150B Valuation

It’s been another big news week for OpenAI. We got updated details about the fundraising efforts (now $7b at a $150B valuation) and the release of the o1 reasoning model. An OpenAI exec also said ChatGPT passed 11 million paying subscribers, implying it is generating at least $225M a month. So is this new model really revolutionary, and more importantly, does any of this justify a $150B valuation?

A Reasoning Model

The release of OpenAI’s o1 (codename “strawberry”) model family is getting a lot of hype. It’s a group of language models (small and large) that are supposed to have more reasoning capabilities. What OpenAI claims makes these models different is their ability to fact-check itself & "think" before responding to reach better outcomes on complex problems than previous models in science, coding, and math.

In other words o1 is slower, on purpose. It takes 5-10 seconds to think before answering. OpenAI claims this offers major improvements in PhD-Level physics questions. But here’s the kicker, it’s ~100x more expensive than GPT-4o mini.

UX and Paradigm Shift

But, this implies what we have here is more of an orchestration and UX improvement than any real improvement in the model. AI expert Jim Fan said “We are finally seeing the paradigm of inference-time scaling popularized and deployed in production.” So perhaps as Sam Altman also claims, this is the start of a new paradigm for consumer AI models, but what is being offered is hardly new technology.

Earlier this year, AI startup OpenPipe released their MoA “mixture of agents” approach—a re-prompted chain of thought orchestration. It keeps asking questions and then feeds them back in over and over to "think" before it gets to an answer. Running it on small open source models like Llama, it outperformed GPTs. But it’s super slow and expensive. Sound familiar? In summary, it may make life easier for some with money and no time to set and forget functions by calling an OpenAI API to get an expensive, slow answer that's better than ChatGPT. But it won’t seriously change life for most serious AI developers at this stage.

“Concerning Capabilities”

This has also raised some concerns that this model is too good, and therefore dangerous. The o1 model safety card reveals a range of “concerning capabilities”, including scheming, reward hacking, and biological weapon creation. But, is this really just branding to make o1 appear smarter than it is? There is no evidence yet it poses a significant danger. It’s still relevant that OpenAI may be inching towards models that might be too risky to release. If they are, they are likely not the only ones, so it doesn’t seem like there is much that can be done to prevent it at this point.

So, About that $150B Valuation…

OpenAI is reportedly in talks to raise $7b at a $150b valuation led by Josh Kushner’s Thrive Capital. It also aims to secure a $5b credit from banks. So is an estimated 18x revenue multiple justified? As Martin Peers says, it likely isn’t so important for the big tech firms like Apple, Microsoft and Nvidia (or Emirati VC MGX) being a strategic, rather than an appreciation play for them. For individual investors, though, it makes a lot less sense. Unless of course, it’s a long-term bet on the costs of AI compute, energy and other overheads dropping exponentially to increase profit margins.

FOR INVESTORS
Open Deals

Request an intro to founders - invest@thetech.buzz

1. 🔥⏱️ Robotics for Agricultural Efficiency - Pittsburgh - Built & deployed robotic hardware for the largest U.S. tree nurseries, reducing costs and increasing efficiency by 50x. Hardware and AI data layer. Beginning to scale globally. Post-revenue, at capacity. (Seed+)
   

2. 🔥⏱️ Quant Trading Software Company - New Jersey - Large-scale automated day-trading algorithm designed for volatile U.S. equity markets. Profitable through extensive backtesting and live simulation. Seeking equity investment for software company.

3. Cricket for the Modern World - India - Physical and virtual ecosystem fostering cricket experiences for enthusiasts and upcoming pros. Data-driven, locally proven, globally scaling. (Seed)

🔥 — hot deal!
⏱️ — leaving soon.

FOR EMPLOYERS
Job Candidates

Request an intro to candidates - jobs@thetech.buzz.

1. Struck Capital Venture Associate, ex-West2East (Russell Wilson) Director of Special Projects, ex-Phoenix Holdings Investment Associate. Harvard BA. Vietnamese pro basketball player.

2. Lockheed Martin Software Engineer, ex-Rutgers Junior Full Stack Developer. Secret clearance. Expertise in C++, PHP, SQL. Rutgers BA in Computer Science.

TRENDING TOOLS AND BUZZY TECH
Tools

UBS - AI tool identifies M&A ideas and potential buyers from 300K+ companies.

Salesforce - Industries AI embeds 100+ AI tools across 15 industry-specific clouds.

NotebookLM - Audio Overviews turns notes, PDFs, Docs into AI-agents audio chat.

Mistral - Pixtral 12B its first multimodal model free apache 2.0 download.

Oracle - 1. World’s 1st Zettascale AI Supercomputer. 2. launches 50+ new AI agents for finance incl. capital management, supply chain, and customer service.

Tech

AirBuds - FDA approves update unlocking use as over-the-counter hearing aids.

Neuromorphic Computing - Molecules revolutionize AI computing hardware.

Magnetic Nanotech - New tech safely rewarms frozen tissues for transplant.

Waymo - New crash data shows Waymo is 60% safer than human-driven.

Microscale Bots - Sub-1mm robots can morph and crawl with an electric zap.

🚨TECH BUZZ ANNOUNCEMENT:

We are making some changes — Our Closed Deals, Companies to Watch, and Funding Buzz sections will now live in a separate email sent weekly on Monday wrapping up the top deals from the previous week.

Please get in touch with feedback on this change and any other suggestions as to what you would like us to feature more of.