Bad Vibes
OpenAI would love a 'government backstop'... When the truth is shared... Bad vibes all around... The AI buzz is wearing off... Thin-skinned CEOs... Steer clear of the AI pretenders...
Is the jig up?...
At a conference hosted by the Wall Street Journal in Napa Valley yesterday, OpenAI Chief Financial Officer Sarah Friar spilled some beans during an onstage interview...
In a bid to remain "the state of the art" in the industry and "be on the frontier chip," (meaning semiconductors), Friar said the ChatGPT creator is thinking of ways to finance development of its signature AI models and grow. Friar said...
This is where we're looking for an ecosystem of banks, private equity, maybe even governmental.
"Meaning a federal subsidy?" the interviewer asked. Friar replied...
Meaning, first of all, the backstop – the guarantee – that allows the financing to happen. That can really drop the cost of the financing but also increase the loan-to-value, so the amount of debt you can take on top of an equity portion.
"Some federal backstop for chip investing," the interviewer said. Friar replied...
Exactly, and we're seeing that. The U.S. government in particular has been incredibly forward leaning, has understood that AI is almost a national strategic asset, and that we really need to be thoughtful when we think about competition with, for example, China.
Are we doing all the right things to grow our AI ecosystem as fast as possible?
Let me (Corey McLaughlin) reiterate that... "as fast as possible." That's all. Not profitable. Not sustainable.
I won't argue that developing AI, or any industry, in the U.S. is important. I'm a fan of industry and jobs being created here in the U.S. just as much as anyone. But when we talk about finding good investments, we don't want to bank on the idea of simply growing as fast as possible.
Just help us take on debt – and fast, Uncle Sam...
Late yesterday, the Journal published a video clip of the above exchange, with the headline "OpenAI Wants Federal Backstop for New Investments."
Market observers rightly pounced on it. As the global news agency AFP said...
The proposal – unusual for a Silicon Valley tech giant – would theoretically reduce OpenAI's borrowing costs since the government would absorb losses if the company defaulted.
Such guarantees would also dramatically expand OpenAI's potential lender pool, as many banks and financial institutions face strict limits on high-risk lending.
OpenAI welcoming a "government backstop" isn't exactly something we want to hear... since the business has been linked to just about every AI infrastructure deal over the past few months and is central to the AI spending boom.
By some estimates, OpenAI has pledged approximately $1 trillion to AI infrastructure partnerships this year, and expectation for AI's adoption has fueled a bull market since OpenAI's GPT-4 debuted in early 2023.
It's even more concerning when you consider OpenAI CEO Sam Altman says his company, the world's largest private venture, won't be profitable for years. How much government help are we talking about just to stay in business?
It's reminiscent of the "too big to fail" banks during the financial crisis... or any other industry, company, or person looking for a bailout. Friar went to LinkedIn last night to spin things...
I want to clarify my comments earlier today. OpenAI is not seeking a government backstop for our infrastructure commitments. I used the word "backstop" and it muddied the point.
Not really. Things are clearer than they've ever been, and skepticism about the high expectations around AI seems to be growing by the day... "Bad vibes all around," wrote the social platform X account Wasteland Capital, summing up the story well.
It's getting harder for AI companies to impress investors...
Over the past couple of days, a few AI favorites have released their quarterly earnings. While they showed monster growth on both the top and bottom line, the shares fell. In short, investors are expecting more and more from these companies.
Let's start with Palantir Technologies (PLTR), which provides advanced software to the federal government, police, and corporate clients that use AI and other technologies.
Palantir beat Wall Street's expectations on both earnings and revenue – with sales jumping 63% (and passing $1 billion for the first time) and net income more than tripling. On the surface, that looks like a great quarter... But the stock still fell 8% on Tuesday, was down slightly yesterday, and lost nearly 7% today.
Our colleague and Stansberry's Investment Advisory editor Whitney Tilson gave one possible reason why shares were down in his daily e-letter yesterday...
Operating cash flow only grew 21%. (When the cash-flow statement doesn't match up with the income statement, it can be an indicator of aggressive accounting. That's something I'll need to look into here.)
The story was the same for chipmaker Advanced Micro Devices (AMD).
AMD beat analysts' estimates on the top and bottom line, with revenue jumping 36% to a quarterly record. The stock still fell about 3% on Wednesday's open before recovering throughout the day, then fell more than 7% today.
AMD forecasts revenue of $9.6 billion in the fourth quarter. That's still a strong growth rate of 25%. But it's a slowdown from the 36% growth in the company's third quarter – and that's not what investors want to see in what is supposed to be the AI hypergrowth phase.
Some folks in the industry are starting to get thin skin...
In an interview over the weekend, Altman got defensive after being asked a simple question: How can OpenAI fund $1.4 trillion in spending commitments on only $13 billion in revenue?
Altman's response was to help the interviewer find a buyer for his shares.
And in his quarterly letter to shareholders, Palantir CEO Alex Karp said that it's "difficult for outsiders to appraise our business." (The stock currently trades at an insane price-to-earnings ratio of 460 and a price-to-sales ratio of around 130.)
Karp also went on CNBC to call investors that are short his stock "egregious" and accused them of market manipulation.
We're not so sure short sellers are to blame... AI has been such a big story – and these companies have performed so well – that investors are expecting more and more from them. And with the big run-up in the stocks, investors are probably going to take any chance they can to lock in some profits. Palantir's sky-high valuation and AMD's slowdown in revenue growth are the reasons this week.
As Whitney pointed out in his daily letter yesterday, Karp's comments could also be bad news for the stock...
A CEO behaving like this is one of the best "tells" of a stock about to collapse.
To be clear, I have no reason to believe there's anything fraudulent about Palantir. It just looks like one of the most extreme stock promotions I've ever seen.
When he wasn't attacking short sellers (or those questioning his company's valuation), Karp did give some thoughts on the AI sector's health. In short, he does see some excess in the markets. But he also believes that the AI leaders will continue to get stronger for a long time. As he said in an interview with CNBC...
The strong companies are going to get much stronger, and the people pretending they're doing stuff are going to disappear very quickly.
Of course, this brings back memories of the dot-com bubble (and even the bitcoin bubble in 2017) – where companies added ".com" (or blockchain) to their names to take advantage of investor hype in the new technology.
Even the winners of the dot-com bubble – like Amazon (AMZN) – saw their share prices take huge hits, taking years to return to peak levels. But we agree with Karp... The companies with solid (and real) AI businesses will likely be in great shape over time.
Many of the "others," though, could lose all their value – and cost investors dearly.
Our colleague Gabe Marshank just named one AI 'pretender'...
In a special report last week to go along with the launch of his Market Maven newsletter, Gabe named seven stocks to ditch immediately. One of them was a company with a "clever" ticker to take advantage of the AI trend.
While we can't give out the name and ticker of this company out of fairness for Market Maven subscribers, Gabe noted that it has changed its name several times over the years to align with the hottest investing trends, from green energy to other technology, and now AI.
And today, Gabe says it has an "uninspiring business." Here's more from that report (available to Market Maven subscribers and Stansberry Alliance members here)...
Revenues are declining this year. The company remains unprofitable. It doesn't have an actual AI business, just an AI ticker.
This is always a sign to avoid. Don't buy these stocks.
Gabe recently released a free presentation unveiling his investing strategy to the public for the first time. He shared his thoughts on AI and more, discusses his highest-conviction idea right now – a 25x investing opportunity – and gives away the company and ticker for free.
It goes offline tonight, so be sure to check it out right here.
New 52-week highs (as of 11/5/25): Applied Materials (AMAT), American Express (AXP), Alpha Architect 1-3 Month Box Fund (BOXX), Ciena (CIEN), Cencora (COR), Donaldson (DCI), EnerSys (ENS), Expeditors International of Washington (EXPD), FirstCash (FCFS), Alphabet (GOOGL), Kellanova (K), Lumentum (LITE), Ormat Technologies (ORA), Roivant Sciences (ROIV), and Vale (VALE).
In today's mailbag, feedback on yesterday's Digest, which included a quote (useful, we thought) from Fed Governor Lisa Cook about the jobs market right now... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"Quoting the MADAM LIAR Lisa CROOK just cheapens a Fine financial News letter. Thanks." – Subscriber Michael S.
Corey McLaughlin comment: Noted. Thanks for calling us "fine" – mostly.
This is a much different response than the last time I mentioned Cook, when a few readers wrote in defending her, saying I made it sound like she was guilty (of alleged mortgage fraud) before she had a chance to make a defense in court.
Maybe I'll just never mention her again.
All the best,
Corey McLaughlin and Nick Koziol
Baltimore, Maryland
November 6, 2025