OpenAI lawsuits are a 'bullish' signal: 'Like the early days of Facebook'

Wall Street investors are particularly bullish on tech as AI transforms many companies' operations. Following its market debut, Reddit (RDDT) outperformed expectations after positioning itself as an AI play. Bedrock Founder & Managing Partner Geoff Lewis joins Yahoo Finance to give insight into how AI is disrupting various sectors in the market.

Lewis focuses particularly on OpenAI and its possible future maneuvers. He compares the company's current legal situation to the "early days of Facebook" (META): "Facebook had a lot of lawsuits as well. I say bring on the lawsuits with respect to OpenAI. I think that's a strong bull signal. The reality is this is a company that's really only been monetizing for just over a year, predominantly with consumers. They've only recently launched offerings to enterprises. It's been publicly reported they're north of a $2 billion revenue run rate. I don't think we've ever seen either in the private markets a revenue ramp that's been this rapid."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

- We're joined now by Jeff Lewis, founder and managing partner at Bedrock. Jeff, it is great to see you on the show. And maybe we'll just start there, Jeff. We talk about the engines driving this market. And we talk about the economy and the Fed. But for sure also, it's just all the excitement about AI, Jeff. I'm just curious how you see that technology evolving here, Jeff. In the near to intermediate term and which are the sectors the industries that you think are going to be disrupted?

JEFF LEWIS: Yeah. Josh, great to be here. I mean, I think we're in a really exciting moment. I think lots is being disrupted. Everything from software engineering to medicine. We are major investors in OpenAI. And I do feel they are at this point clear mega platform that is powering this wave and partnership with Microsoft. But in general, I just think it's a massive, massive positive tailwind for technology broadly. You were talking a moment ago about GameStop.

There's a sense in which that phenomenon back in 2021 was really powered by Reddit. And now it's come full circle, where you have Reddit surging 40% since IPO. And I think a lot of the enthusiasm around even Reddit is underpinned by what AI is going to be able to unlock for all of these technology platforms. So frankly feeling very bullish on tech broadly because of in large part AI and what it promises over the years to come.

AKIKO FUJITA: Jeff, let's talk specifically about OpenAI then. I mean, we've been talking so much about the exuberance around AI. NVIDIA obviously a big beneficiary on the back of that. But OpenAI is not a publicly traded company. There's been a lot of debate about where this company goes from here. Given the foundation of how it started, how it's now a for profit company and that lawsuit coming through from Elon Musk recently. Where do you think OpenAI, as a business, moves from here?

JEFF LEWIS: Certainly. Well, as a starting point I think lawsuits are always a really positive sign. And so when you have lots of different folks suing a company as you have that with the case of OpenAI. Publishers suing, you have Elon suing. That is just an incredibly positive sign. I think in the early days, Facebook had a lot of lawsuits as well. So I say bring on the lawsuits with respect to OpenAI. I think that's a strong bull signal. The reality is this is a company that's really only been monetizing for just over a year predominantly. With consumers, they've only recently launched offerings to enterprises.

It's been publicly reported they're in worth of a $2 billion revenue run rate. I just don't think we've ever seen, in the private market, a revenue ramp been this rapid. And if you think about where private markets investors like myself, were at. Seven or eight months ago, there was a lot of questioning around some of these other LLMs going to really overtake OpenAI. The reality is they just haven't. And so if you look at the landscape of generative AI startups in the private markets today.

The overwhelming majority of those companies are wrappers on GPT. So to me OpenAI is at this point the clear winner. The revenue ramp frankly speaks for itself. And the partnership with Microsoft does give it several unfair advantages as they go to market. With enterprises expand the product offering, the stuff they're doing now. Starting to work on now with Sora, partnerships with studios.

I just think the range of markets that this company is going to impact is tremendously broad.

- And Jeff, you mentioned how Musk is suing OpenAI. And his point seems to be, Jeff, you know I put time in here I put money in here with the promise it was going to be open source. How do you think that fight plays out?

JEFF LEWIS: Well, no idea. I'm not a legal analyst. And certainly I would not ever want to be on the other side of a lawsuit with Elon. So it's hard to predict exactly what happens. But I think there are, some stuff's been released. And it seems as if all folks, including Elon in the early days all agreed that there had to be a for profit type model. They had to raise significant financing in order to maintain their lead.

And so I think when-- we're going to see with the facts. The facts come out, but I imagine that it'll be a prolonged protracted lawsuit. And I don't quite know where it'll land. But I do think the meta point I'm trying to make is the lawsuits are a very positive sign. When something is powerfully working folks come out of the woodwork and sue.

AKIKO FUJITA: Jeff, finally, I do have to ask you about what's playing out with TikTok. Obviously, the Senate now taking up a bill that essentially calls for a spin off of this company from its Chinese parent company. Let's say the spin off does happen. It moves in that direction. Is this a company you'd invest in? Is it a good buy? I mean, you've got everybody from Steve Mnuchin to Kevin O'Leary saying, look, if we're able to separate it from the Chinese parent company we want to buy in.

JEFF LEWIS: I don't think that we personally at Bedrock would be interested in doing it. It's a-- the valuation will likely be extraordinarily high. And more importantly, my view on TikTok is that it's actually been very negative for society. Just even beyond the CCP element with the control from ByteDance. If you spend any time with young children these days, they're just completely addicted to it.

And I personally, we're at a point here as investors at Bedrock we can invest in really whatever we want to. And we want to invest in things we think are making the world a little bit better. And I think TikTok is making the world a little bit worse. So not for me. But frankly I don't even think they're going to be able to pull off the divestment. I mean, if you look at how long it took Elon to buy Twitter. That was six months of highly motivated buyers. Took Facebook seven months to buy WhatsApp I don't see how you can do a transaction this big in six months.

AKIKO FUJITA: Yeah. Which is why this bill has been characterized as an effective ban, because of just how difficult that is. Jeff Lewis, Bedrock founder and managing partner. It's good to talk to you today. I appreciate the time.