OpenAI's Continued Expansion of Its Revenue Stream Bodes Well for 4 Holdings

Following up on our action Monday morning to add more shares of SuRo Capital (SSSS) , there are several arguable positive headlines for OpenAI, which reaffirm that move. However, they also bode well for other holdings of ours, such as Microsoft (MSFT) , Nvidia (NVDA) , and Amazon (AMZN) that are investing in OpenAI.

The first one, which we think is tied to OpenAI having to build revenue ahead of the expected IPO later this year, is bringing ads into ChatGPT. OpenAI first floated this idea in mid-January, but it’s being reported that folks using the free version of ChatGPT or the Go subscription plan may start to see ads in the chatbot.

Like other tech companies, such as Meta (META) and Google (GOOGL) , OpenAI has shared more about this:

"Today, we’re beginning to test ads in ChatGPT in the U.S. The test will be for logged-in adult users on the Free and Go subscription tiers. Plus, Pro, Business, Enterprise, and Education tiers will not have ads. Ads do not influence the answers ChatGPT gives you, and we keep your conversations with ChatGPT private from advertisers. Our goal is for ads to support broader access to more powerful ChatGPT features while maintaining the trust people place in ChatGPT for important and personal tasks. We’re starting with a test to learn, listen, and make sure we get the experience right."

Reading between the lines, that points to OpenAI looking to expand the reach of ChatGPT by taking a page out of the Netflix (NFLX) and Disney (DIS) playbooks – offering discounted, ad-supported subscriptions to the service. In our view, that would likely expand the user base as well as drive incremental revenue, just like it has at Netflix. Comments from others inside OpenAI indicate the company expects ads to make up less than half of its revenue long term.

as an aside, we believe this is another potential headwind for shares of Trade Desk (TTD) .

Second, and with that revenue mix in mind, OpenAI is also looking to make inroads into the insurance space:

"OpenAI has approved the first artificial intelligence application from an insurance provider on ChatGPT, enabling users to receive personalised home insurance quotes within the conversational interface… The application processes user intent, gathers required information through conversational exchanges, and returns quotes from a regulated carrier in real time without requiring users to exit the AI interface. Policy purchasing functionality is expected to be added to the application."

That last sentence was the one that stood out to us, especially as there is likely to be a feeder relationship that drives some slice of revenue to OpenAI.

We believe we are likely to hear more on these fronts as OpenAI looks to complete its current round of fundraising. Reports on that effort, which have been pegged at around $100 billion, indicate fundraising conversations are likely to heat up over the next two weeks.

Should that round be completed before SuRo reports its December-quarter results, we’ll use the post-money valuation to revisit our SSSS price target. Considering its last portfolio update as of September 30 showed its investment in OpenAI at $27.7 million (11% of its overall portfolio) and using OpenAI’s then post-money valuation at $300 million, if the current fundraising efforts deliver a post-money valuation near $800 million… you see where this could lead.

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