A look at OpenAI's historic week of announcements amid simmering AI bubble concerns

OpenAI, backed by Microsoft, has solidified its position in the AI industry through significant partnerships with major companies like Nvidia and Oracle, planning to establish over 10 gigawatts of AI data centers.

Despite concerns about a potential "AI Bubble," analysts compare the current AI investment climate to 1996 in Silicon Valley, suggesting strong potential for growth beyond inflated valuations.

OpenAI faces skepticism about its ambitious goals, with experts questioning whether it can secure the necessary resources and funding to compete against formidable rivals in the field.

Investors interested in AI and robotics are provided with a list of relevant exchange-traded funds to consider, indicating a growing market interest.

Recommendation Rating: Strong Buy for AI Enthusiasts and Investors

This week, OpenAI, supported by Microsoft (NASDAQ:MSFT), has further established itself as a frontrunner in the artificial intelligence (AI) industry. The organization announced significant partnerships with key players including Nvidia (NVDA), Oracle (ORCL), SoftBank (OTCPK:SFTBY)(OTCPK:SFTBF), CoreWeave (CRWV), and Databricks.

These developments come at a critical moment as concerns about a potential stock market bubble—particularly linked to the AI frenzy—are intensifying. The soaring valuations of various tech companies have raised eyebrows, with some analysts remarking that OpenAI's current trajectory exemplifies a notable case of "fake it till you make it" in Silicon Valley.

The week kicked off dramatically when OpenAI announced plans to establish at least 10 gigawatts of AI data centers using Nvidia's systems. Nvidia has committed to a staggering investment of up to $100 billion, phased with each gigawatt's deployment.

Dan Ives, a prominent tech analyst at Wedbush, commented, "The Nvidia/OpenAI deal marks another significant moment for the ongoing AI Revolution, signifying the trillions being invested in this sector. Despite fears of an 'AI Bubble' and high valuations, we regard this as a 1996 moment for the tech industry, not a repeat of 1999."

On Tuesday, OpenAI revealed further expansion of its Stargate partnership with Oracle and SoftBank. This venture will introduce five additional AI data centers in the U.S., leading to nearly 7 gigawatts of planned capacity and over $400 billion in investment commitments over the next three years.

The week concluded with CoreWeave announcing an expansion of its agreement with OpenAI by up to $6.5 billion, raising their total contract value to approximately $22.4 billion. In a separate announcement, data analytics platform Databricks disclosed a partnership valued at $100 million with OpenAI.

Gil Luria, head of technology research at D.A. Davidson, expressed skepticism regarding OpenAI's ambitious commitments. He stated, "It is a common pattern in Silicon Valley to make grand promises with the hope of following through, which is precisely what OpenAI is attempting here."

He further noted the significant challenge ahead: "The probability that OpenAI can meet these ambitious goals is relatively low. While ChatGPT has a head start and is popular and effective, they are banking on their ability to secure compute resources that will outpace competitors like Google (GOOG)(GOOGL), Meta (META), Anthropic (supported by Amazon (AMZN)), and Elon Musk's xAI—all of which are formidable players with substantial funding."

Luria added, "OpenAI must also secure the $500 billion it pledged, a daunting task. While they may ultimately succeed, it currently resembles a classic 'fake it till you make it' scenario."

For those looking to invest in AI and robotics, here are some noteworthy exchange-traded funds to consider: (NASDAQ:AIQ), (NASDAQ:BOTZ), (NYSEARCA:DTEC), (BATS:WTAI), (NASDAQ:XAIX), (NASDAQ:WISE), (NYSEARCA:GINN), (NASDAQ:ROBT), (NYSEARCA:TECB), (NASDAQ:XT), (NYSEARCA:THNQ), and (NYSEARCA:CHAT).