Professor and technology analyst at New York University, The New York Times Scott Galloway, bestselling author of *The Big Bang Theory*, issued a stark warning about the valuations of tech giants, stating that if generative artificial intelligence... The financial collapse of OpenAI, a leader in artificial intelligence, will trigger a systemic shock.
“At that time, investors in global markets will have nowhere to hide,” he said.
In his podcast, Galloway stated that the market's current reliance on artificial intelligence is volatile, noting that since ChatGPT's launch in late 2022, AI-related themes have contributed 80% of stock market returns. He and host Ed Elson reminded viewers: "Artificial intelligence is linking the stock market and the economy, and OpenAI is at the heart of the story."
Galloway's warning was triggered by a series of "red flags" indicating that OpenAI might be experiencing a financial "implosion," which Elson described as "a train crash from a financial management perspective." They explained that OpenAI currently has an estimated annual recurring revenue (ARR) of $13 billion, but its expenses are more than double that figure.
OpenAI CEO Sam Altman anticipates spending commitments exceeding $1 trillion, with plans to spend $1.4 trillion to $1.5 trillion over the next few years. Galloway points out that this will create a massive shortfall of approximately $1.2 trillion given their current cash reserves.
They also targeted Altman himself. Galloway stated that OpenAI will file for an IPO sometime in 2026 due to its massive size. However, Altman's behavior is unacceptable for the CEO of a publicly traded company.
He pointed out, "When you're on an earnings call and someone asks you a neutral question, as far as I know, no sitting CEO would turn around and say, 'Okay, if you don't like it, you can sell your stock.'" Elson described Altman's reaction as "horrible... I can't think of a more defensive, crazy, or antisocial reaction."
He added, "If you want to shake investor confidence in OpenAI, I would say you should do it." They agreed that this was a "rare blunder" that likely reflects the pressure Altman is currently under.
In addition, they discussed OpenAI CFO Sarah Friar's recent appeal to the federal government for financial assistance. Although Friar herself and Altman later clarified that it was a "misunderstanding," Galloway believes this again demonstrates the company's lack of a viable financing plan and its potential reliance on debt financing, which he sees as the beginning of the end of the AI bubble.
Galloway emphasized that highly inflated bubbles often burst due to a “narrative shock”—a spectacular event that causes a dramatic shift in emotions. He said that if he had to bet on a trigger, he believes “OpenAI’s implosion” is the most likely cause of such a collapse.
What will be the consequences?
Galloway stated that if the market loses confidence and the music stops, the consequences could be dire.
According to him, historically, companies like Meta and Nvidia... and Netflix Large tech companies with such high valuations often see their stock prices fall by 50% to 70% within 12 months. For example, Meta and Netflix have both experienced near-death experiences in recent years, with stock price fluctuations causing their market value to evaporate by two-thirds in a single day.
Galloway warned that, given the size of the current top ten companies, a similar decline for Nvidia would be catastrophic. He emphasized that when the S&P 500... When 40% of the stocks in the S&P 500 are tied up in 10 companies, “if half of those companies are cut, no one will survive.”
Apollo Global Management Torsten Slok, chief economist and top analyst at Apollo Global Management, has been warning that the S&P 500 will remain overly concentrated in 2025. Last Saturday, he also pointed out that the stock returns of the past five years have come "almost entirely from the seven largest stocks," with virtually no other stocks contributing to the growth.
Galloway prompts the audience to imagine this scenario: large companies that have been experimenting with AI in multi-million dollar contracts say they can't really measure what generative AI has delivered for them. When one company says, "We're scaling back significantly because it's not providing the ROI we expected," then a bunch of other companies jump in and say, "Yes, actually, that's true for us too."
“If the music stops, these companies will not only have no chairs, they will have to sit on scorching hot coals.” He concluded: “If the OpenAI story is exposed, the market decline will be very severe, and people will have nowhere to hide.”
(Article source: CLS)
