Mon, Nov 2, 2026|Whitney Tilson

Updates on OpenAI and Starbucks; I ran the NYC Marathon on my birthday yesterday

1) Last Friday, the Wall Street Journal published three articles reinforcing my view that the days of easy, cheap money fueling the AI bubble are over – and, as such, it's starting to burst:

The last article is particularly concerning. It looks like a big nail in the coffin for OpenAI, which I believe is the greatest cash-burning furnace of all time.

Even after taking an 11% haircut on its valuation, the company raised barely one-third of the cash it desperately needs to continue its AI build-out.

This X post by user Ric_RTP lays out the implications. It begins:

I believe OpenAI will end up as this era's WeWork, but on steroids – and this is just further evidence. As I noted in my February 3 e-mail:

[WeWork] soared to incredible heights, peaking at a $47 billion valuation in 2019. But as the company was preparing to go public, investors saw its financials in the IPO prospectus, realized it was a house of cards, and fled.

Without the injection of new capital, WeWork imploded. It eventually went public in 2021 by merging with a special purpose acquisition company ("SPAC"). That flopped too, and WeWork filed for bankruptcy in 2023.

Like I've highlighted the past few weeks, the AI bubble will have plenty of losers. But my friend Jeff Brown, founder of Brownstone Research, has identified a potential winner...

This company's AI "super chip" is 50 times faster than Nvidia's (NVDA). And it could open the opportunity of the decade for investors who get in early – before a pivotal announcement on Thursday, November 5.

Jeff and I went on camera last week to share all the important details. But if you missed our presentation, don't worry – you can watch a replay right here.

2) Coffee giant Starbucks (SBUX) reported strong fourth-quarter earnings last Thursday...

Revenue came in at $9.1 billion – a 4% decrease year over year ("YOY") – but this was primarily driven by retail operations in China converting to a licensed joint-venture model.

U.S. revenue rose a healthy 6%, driven by a 7.7% jump in comparable-store sales, which were well above expectations.

Adjusted operating margin rose sharply from 9.4% to 14%. This drove earnings per share ("EPS") to $0.80, up 54% YOY and handily surpassing estimates of $0.72.

The balance sheet and cash flow are much better...

For fiscal 2026, operating cash flow rose 5% to $5 billion. Capital expenditures ("capex") fell 45% to $1.3 billion, resulting in $3.7 billion of free cash flow ("FCF"). In addition, the company received $2.5 billion from divesting its operations in China.

The company used this cash to pay down $2.8 billion of debt and $2.8 billion in dividends (the stock currently yields 2.4%).

For insight, I once again turned to my friend Lloyd Khaner of Khaner Capital, who has been the ax on Starbucks for decades.

I last shared his thoughts in my May 1 e-mail, in which he wrote:

With the latest earnings report, Starbucks decisively planted a flag – this turnaround is now underway in earnest. I'll be honest: The results were even better than I expected, and I was expecting a lot.

This is becoming a textbook case study in how to turn around a world-class franchise with one of the most powerful consumer brands in history...

While my fiscal 2028 earnings-per-share estimate remains at $5 – still about $1.50 above Wall Street – it now looks increasingly achievable... and increasingly conservative.

For now, I'm maintaining my $150 price target. It looks increasingly likely to be reached sooner than 2028 – and increasingly likely to prove too low. Way too low...

Regarding last week's results, Lloyd wrote to me:

These were excellent results. To paraphrase the words of the CEO and CFO, the turnaround stage is complete and the growth stage has begun. On the call, management stated that they're basically one year ahead of the schedule they laid out earlier in 2026.

What really needs to be highlighted is that traffic is up, transactions are up, and they're doing it with minimal price increases. They also don't plan on big price increases to drive their same store sales. The number of new store openings for next year has been raised and likely will be raised even more going forward.

Operating margins are improving rapidly with a lot more to come. I'm looking for free cash flow to match or perhaps exceed net income for the next few years, which will allow for continued stock buybacks and steadily increasing dividends.

In a stock market that's desperately seeking companies generating strong, predictable free cash flow, Starbucks looks to be one of the champions.

The Starbucks ship has set sail once again. "Don't miss the ride!"

Thank you for sharing an excellent idea with my readers, Lloyd!

As for valuation, at this morning's price of around $104, the stock trades at 32.4 times analysts' consensus 2027 estimates of $3.21 and 27.9 times 2028 estimates of $3.73.

Those are rich – but not crazy – multiples. However, if Lloyd is right that Starbucks will earn $5 per share in 2028, the stock will do very well...

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.

P.P.S. It was my second annual 59th birthday (aka my 60th) yesterday! I celebrated by running my third New York City Marathon in the morning. I also ran it on my 49th birthday and the day after my birthday last year.

I'm glad to see that I'm getting faster with age. I ran it in 2015 in 4:03:10 and last year in 3:59:54 – both times with little training. So I was hoping that a year to train would result in a massive 16-minute improvement to 3:44, which is an 8:32 pace. (That's the qualifying pace for the Boston Marathon for a 60-to-64-year-old man.)

I was on track to do so through mile 14. But then I had tummy troubles, which required a 90-second bathroom pit stop during mile 15. I had one last fast mile at 16, but my lack of long-distance training caught up with me and my legs got very fatigued. I wasn't out of breath, and they weren't painful or cramping – they simply wouldn't respond to my pleas to go faster. So pretty much every mile got slower and slower for the rest of the race.

I averaged a 9:30 pace over the last 10 miles, as you can see here (there was another pit stop during mile 24):

I finished in 3:53:27, which was in the top 25% overall (15,456 of 61,062). And I was in the top 16% in my age group (221 of 1,365 men aged 60 to 64). While I wasn't close to qualifying for Boston, not many people run a 6.5-minute personal best in the marathon at age 60. So I'm only 10% disappointed with my time and 90% very happy.

Here's my Garmin watch report with my splits, heart rate, etc. Here are pictures from the race and afterward with my 24-year-old youngest daughter, Katharine, who also ran:

Then we had a birthday party all afternoon with 100-plus friends and family. The highlight was my best friend (and best man at my wedding 33 years ago), Fred Singer, giving a hilarious, touching toast/roast, which you can watch here. Here are some pictures from the party:

I already have all the gifts in life I could ever want. So for my birthday, I only asked for donations to the charity I ran for: New York's No. 1 poverty-fighting organization, Robin Hood. If you're interested and have the means, you can donate here.

All in all, it was a perfect day!