Cathie Wood Joins the ChatGPT Boom with New OpenAI Stake

(Bloomberg) — Cathie Wood’s Ark Investment Management announced it holds a stake in Silicon Valley artificial intelligence darling OpenAI, a bet that the nascent AI industry will remake the technology landscape.

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In an email to customers on Thursday, Ark said: “Starting April 10, 2024, the Ark Venture Fund invests in OpenAI,” referring to its $54 million venture capital fund. “OpenAI is at the forefront of a Cambrian explosion in artificial intelligence capability,” the technology-focused asset manager said in the note.

Launched in September 2022, the closed-end interval fund invests in public and private companies – including Elon Musk’s SpaceX, Epic Games Inc., Freenome Holdings Inc.

“Our fund is relatively new and small and for us, honestly, the incremental progress in the foundation model space has been faster than we had anticipated,” said Brett Winton, Ark’s chief futurist and member of the investment committee, in an interview. “We think there is $16 trillion in potential market capitalization that will be commanded by foundation model-type companies by 2030.”

OpenAI has raised huge sums of money, most of it from Microsoft Corp., which invested $13 billion. The company also allowed some employees to sell shares through a so-called public offering valued at $86 billion. Ark said it invested in the company through a special purpose vehicle, but did not provide further details. OpenAI did not comment on the bet.

The startup will represent about 4% of venture fund Ark’s holdings, Winton said. Ark also has a stake in rival Anthropic, accounting for around 5% of the same fund.

Wood’s most famous vehicle, Ark Innovation ETF, catapulted to fame during the height of the pandemic after making big bets on companies like Tesla Inc. This year, the exchange-traded fund stumbled after a decline in the automaker’s stock price of electric cars.

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The venture fund is mainly made up of private companies – around 80% of total holdings. The value of its assets is updated daily in an effort to offer everyday investors in Ark’s product the fairest value, Winton said.

“The Sora model is mind-blowing,” said Winton, referring to OpenAI’s recently released text-to-video generative AI tool. “The acceleration in the pace of innovation is mind-blowing and that’s why we wanted the exhibition.”

Winton said the company is aware of the risks posed by OpenAI’s unusual corporate governance structure, but added that most technology platforms are exposed to a certain level of risk anyway.

“Nuclear power is an amazing technology that was effectively derailed by the regulatory burdens that were placed on it in the 1970s,” he said in an interview Friday with Bloomberg Television. “There is a possibility that this could also happen with AI, where we are worried about something and so we deny ourselves all the benefits of it.”

–With assistance from Rachel Metz and Caroline Hyde.

(Updates with quotes from Bloomberg television interview beginning in penultimate paragraph.)

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