Finimize - 🚀 OpenAI's $150 billion valuation

What’s going on here?

ChatGPT-creator OpenAI has entered talks to raise $6.5 billion at a $150 billion valuation, and its loyal league of chatbot communicators seem happy to oblige.

What does this mean?

ChatGPT has become the holiday planner, live-in doctor, and work assistant for millions. And now, the chatbot’s creator wants the favor returned. OpenAI is fundraising at a valuation of $150 billion – a serious upgrade from $86 billion earlier this year, and enough to solidify its spot among the world’s top startups. Insiders say long-time investor Microsoft is eager to contribute, along with Apple and Nvidia. And as many tech giants have done before, OpenAI is cozying up to banks to secure a $5 billion revolving credit line – funds that borrowers can access, repay, and then borrow again.

Why should I care?

For markets: A high-tech house of cards.

OpenAI should have no problem burning through that cash: AI’s an expensive business, with data centers and cutting-edge development to fund. But with companies and investors throwing billions into the sector, an increasing number of skeptics are wondering when – if ever – those investments will pay off. Sequoia Capital believes that to cover this year's spending on data centers and chips, AI must make $600 billion in revenue. But so far, analysts estimate it’s only pulling in tens of billions: petty cash, for tech.

The bigger picture: Old dog, meet new tricks.

The AI all-stars are as expensive as they are enticing, so many investors are swapping out the likes of Nvidia for more affordable tech stocks. Take IBM, for example. One of the original tech giants, the company’s been investing in AI initiatives – yet, it’s still trading for less than the buzz-worthy names and the Nasdaq 100 index. That’s winning over investors who value, uh, good value: the stock is up 30% this year, recently hitting a record high for the first time in over a decade.

What’s going on here?

The European Central Bank (ECB) cut interest rates to 3.5% on Thursday, after the economy sent out more than a few SOS signals.

What does this mean?

High interest rates have brought European inflation to within touching distance of the central bank’s 2% target. So now, the ECB can focus on addressing the economy’s cries for help. See, European households aren’t spending enough to keep the economy on track, and manufacturers are seeing international customers pull back on spending. That slowdown has already forced the central bank to slash its forecasts for the next two years. So it makes sense that it reached for the scissors on Thursday, trimming rates by 0.25 percentage points for the second time this year – a move that ought to encourage businesses and shoppers to spend more. And despite inflation ticking up in the services sector, traders are expecting at least one more 0.25 percentage point cut this year – if not two.

Why should I care?

For you: Resume the house search, Europe.

Thursday’s cut will likely be toasted by would-be homeowners. High rates have seriously put folk off home loans – in fact, mortgage lending in Europe is predicted to flatline this year for the first time ever. That’s a big deal: mortgages make up nearly half of all the loans in the region. And when borrowing slows down, an economy usually does too.

For markets: Eyes on the targets.

Rate cuts weren’t the only reason investors had eyes on Europe this week. Shares in Commerzbank picked up by 17% on Wednesday, after UniCredit revealed it had built up a 9% stake in the banking institution and initiated talks of a merger. If it goes through, the deal would create the biggest lender in Germany. JPMorgan analysts think that could set off a wave of mergers and acquisitions across the European banking sector, pushing up the stocks of banks that look like tidy targets.