Editor's note: AI's revolutionary breakthroughs aren't slowing down anytime soon... But that doesn't mean you should put your money into any AI stock. In fact, Jeff Brown – founder and CEO of our corporate affiliate Brownstone Research – is warning folks not to invest in the IPOs of two big names. In today's Masters Series, adapted from the September 21 issue of the free The Bleeding Edge e-letter, Jeff explains why investors should avoid two of AI's biggest players as they prepare to launch publicly...
Don't Buy Into the Anthropic and OpenAI IPOsBy Jeff Brown, editor, Exponential Tech Investor It seems that every day, the rabbit hole just keeps getting deeper... Watching this drama unfold is partially entertaining and partially an exercise in sheer disbelief. The events spanning this past month surrounding this sudden need to "slow down" AI, which on the surface has been led by Anthropic and OpenAI, have turned out to be a deep dark web being pushed by a small cult-like group of billionaires and their effective altruism ("EA") followers. It's the same tired and repeated story of the ages... a small group of elites makes a massive play for more money, power, and control over the general population. We hate to see this kind of tyrannical behavior, even more so considering all the incredibly positive developments of the past couple of years, technological advancements that will dramatically improve the world's quality of life, and human longevity itself. We cannot forget that one of the largest proponents of EA was Sam Bankman-Fried of FTX. He was a poster child of the movement, one that we discovered perpetrated one of the largest financial frauds in history. Not a good look for EA. In an Ask Me Anything ("AMA") from last month titled "Beware of Biased Billionaires," I wrote:
Over the [p]ast week, we have discovered that this is a massive, well-coordinated operation carried out by some powerful billionaires – in cooperation with some prominent political figures – who want to gain control of this powerful technology for both financial gain and for societal control. It is truly something that feels like it is out of some dystopian science fiction novel.
To be very clear, this psyop is designed and well-funded. Behind it are two tech billionaires – Dustin Moskovitz and Jaan Tallinn. Moskovitz was a co-founder of Facebook, founder of Asana, and was an early investor in Anthropic. Tallinn was the founder of Skype, which was acquired by Microsoft for $8.5 billion.
Moskovitz has been the tip of the spear. He founded a venture foundation known as Good Ventures Foundation, which in turn founded and funded philanthropic fund Coefficient Giving (formerly known as Open Philanthropy). The names of these organizations always sound nice and magnanimous. Names that, on the surface, give good vibes. But we won't let that fool us. After all, would we really expect them to name themselves something like "Totalitarian Ventures," "Dark Lord Philanthropy," or "Give Up Your Freedoms Giving"?
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Additionally, a few days before my AMA, some even more astounding revelations came to pass that involve an EA organization in Israel known as Irregular (formerly known as Pattern Labs). Irregular has substantial funding, personnel, and community ties to the EA movement. The chief technology officer of Irregular is a co-founder and board member of Effective Altruism Israel. And Open Philanthropy (now Coefficient Giving) gave millions to Pattern Labs (now Irregular) in 2024. The goal was to establish an "independent" lab that would focus on mitigating the security risks of artificial intelligence and other emerging technologies. And here's where Irregular's role in this drama gets very interesting... Irregular was directly involved in all of the cyberattacks where frontier AI models were "misaligned" and escaped their supposed sandbox environments...
Alphabet (GOOGL) initially chose not to disclose the illegal cyberattacks that its AI model, Gemini, made on three public companies because it claimed that Gemini didn't cause any harm to the companies, and that the AI model ended each intrusion once it figured out it had hacked public companies. Even if we assume that is true, laws were broken with these cyberattacks. Perhaps damage was even done. And in each case, each company's explanation was that there was a configuration error, or a mistake in the setup, or the development team accidentally gave the AI access to the Internet. As a reminder, these are some of the most talented and well-paid computer scientists in the world. I'm pretty sure they know how to program a sandbox to safely test their AI models. The fact of the matter is that these models were programmed to do what they did. Anthropic and OpenAI used these events to push their agenda of AI doomerism and the need for strict regulations. And EA philanthropy literally pays the salaries for journalists at media outlets like Time, the Verge, Bloomberg, Los Angeles Times, NBC News, Science Magazine, the Guardian, the Information, the New Yorker, and many more, to push out the EA propaganda and AI doomerism. The question that I'm sure we've all had is why? Why the elaborate and systematic funding of this web to push this agenda? The answer is simple. Artificial general intelligence ("AGI"), and ultimately artificial superintelligence ("ASI"), are worth trillions of dollars and will be powerful enough to control human civilization. "One ring to rule them all." And you need a whole lot of money to buy that kind of power. Which leads me to the forthcoming Anthropic and OpenAI IPOs. Both Anthropic and OpenAI have committed trillions of dollars in capital expenditures to develop their frontier AI models, AGI, and ultimately ASI. They need even more capital than they have access to. However, as we've discovered, China-based companies have effectively "stolen" their intellectual property, and that of Alphabet's as well, by distilling their frontier models. For a fraction of the cost, they have extracted AI models that are almost as powerful as the frontier AI models, and they run for a fraction of the cost. That means that Anthropic, OpenAI, and Alphabet's moat means almost nothing. They have to carry the majority of the capital expense to build the AI infrastructure, and they have to compete against entities that effectively stole their technology. And they have little to no recourse in China for the intellectual property theft. This is precisely why they are asking for strict regulations and potentially a ban on any open-weight AI models out of China. This is a push to protect future gross margins and ultimately lead to regulatory capture. It's also a push for a liability exemption for anything that happens with their AI models. And it won't work. SpaceX's (SPCX) Elon Musk, Meta Platforms (META) co-founder Mark Zuckerberg, and Nvidia (NVDA) CEO Jensen Huang have recently spoken with President Donald Trump and his former AI and Crypto Czar David Sacks in support of maintaining current AI-development acceleration in the U.S. The group is strongly opposed to the kind of governing body that Anthropic and OpenAI are espousing. In response to the public outcry, Trump has announced intentions to name a new artificial-intelligence czar to head an "AI Force" agency. It will focus on maintaining the U.S.'s position as a leader in AI development and protecting against unnecessarily restrictive regulations under the guise of "AI safety." Trump wrote in a post on his Truth Social platform, "We will not in any way hinder or stifle the Growth of this incredible Industry." Huang weighed in on CBS News, suggesting that the cyberattacks actually broke laws. He said that we don't need new laws and new regulations. We need to enforce the laws that we have. Huang went so far as to say, "They're asking to be relieved of the laws we do have, and I think that's a problem." Palantir Technologies (PLTR) CEO Alex Karp took it one step further on CNBC to explain...
The reason that tokens are discounted is not so they can grow their market. They're discounted so they can get access to your IP so that their models get better.
Karp has heard this directly from Palantir's customers and partners who discovered the game being played by Anthropic and OpenAI the hard way. He said...
Our partners are livid. The kind of safety they're most upset about is what they believe is the theft of their alpha.
What they mean by that is that Anthropic and OpenAI have not disclosed that their models were learning from their customers' proprietary information – information that comes as a result of trillions of dollars of investment over decades. Anthropic and OpenAI are basically committing the equivalent of what China-based companies are doing to them. Even Treasury Secretary Scott Bessent stepped up on CNBC and didn't mince words on the issue, saying:
The labs also said, "take the liability off of our hands." And we will not do that.
He went further, stating clearly...
The Hugging Face incident is the responsibility of OpenAI management, not a bunch of agents. It is humans who are responsible, not the AI. These labs need to take responsibility for themselves. They can slow down anytime they want to.
Bessent was referring specifically to Anthropic and OpenAI. His response was common sense and very well said. These developments do not bode well for the Anthropic and OpenAI IPOs. Their entire moat is at risk, and I do not believe that the effective altruists behind OpenAI and Anthropic will have their way and be able to slow things down. We won't fall for their ruse. These two IPOs will be nothing more than liquidity events for the effective altruists, venture-capital firms, and private equity that invested in Anthropic and OpenAI as private companies. They will make hundreds of billions of dollars and sell their shares happily to unsuspecting retail investors who don't understand the nuances of the strings that are being pulled in the background. Investors will regret buying into these IPOs in the months that follow. As margins collapse in these two companies and the competitive market flourishes, they simply won't maintain the kind of market share that they have today. But that doesn't mean that there aren't incredible investment opportunities related to these IPOs. The facts remain. Both companies will likely raise on the order of $200 billion between the two IPOs. And that capital will absolutely be invested back into the technology companies that continue to enable the largest infrastructure build-out in history – the AI data centers that will power artificial general intelligence and, in two or three years, artificial superintelligence. Those are the companies that are less understood and are critical to artificial intelligence. They are the companies that the smart money is flooding into before and after they take their profits off the table from the Anthropic and OpenAI IPOs. Regards, Jeff Brown
Founder and CEO, Brownstone Research
Editor's note: Jeff called the bottom of 2020's crash... recommended Nvidia before it soared 35,000%... and told folks to buy bitcoin before it rose 30,000%. Now he's stepping forward again to share his latest discovery. A new AI super chip 50 times faster than Nvidia's chips is slated to release soon. And it has the potential to ignite a new AI bull run. But not every AI company will prosper. In fact, Jeff says only these five companies have the potential to make you 10 times your money. |
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