Alternative Investing Report - October 1, 2024

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As OpenAI prepares for its upcoming funding round, reportedly sized at $6.5 billion at a $150 billion valuation, its financials have been leaked, giving everyone a look under the hood of the world’s biggest AI startup. Its monthly revenue hit $300 million in August, a 1700% rise since the beginning of 2023, underscoring its rapid growth. The company expects to bring in $11.6 billion in revenue next year and $100 billion by 2029. Its userbase has grown from 100 million in March to 350 million in June. On the flip side, it expects to lose $5 billion this year, highlighting the need for a capital infusion, and expenses seem to be scaling as quickly as revenues.

➨ TAKEAWAY: A $5 billion annual loss is nothing to sneeze at, but OpenAI’s exponential growth potential is what potential investors are coveting. Apple has dropped out, but Microsoft continues to build its stake. SoftBank is committing $500 million, and Thrive Capital is investing $1 billion, with an option to invest $1 billion more by the end of 2025. While everyday investors are not going to be able to invest in this round, it is instructive to see how VC firms and other investors are approaching it.

Over the past couple of decades, investors and collectors have been dabbling in the market for Pu-erh, a fermented Chinese tea often sold in brick or disk form - called a cake. Like with wine, the longer a Pu-erh cake is aged, the more valuable it becomes, and because of the way it is packaged, it can last indefinitely. Last year, a single cake from the 1950s sold for $71,600 at Sotheby’s. A Dayi 801 Gaoshan Yunxiang cake from 2008 rose in value from $25 to over $1,000 last year.

➨ TAKEAWAY: If wine and whiskey can be considered asset classes, then why not tea? In the collectibles world, scarcity and desirability drive the value of items, and as this proves, there is a market for nearly everything with those qualities. Savvy investors should always be on the lookout for opportunities and not dismiss any possibilities, even if they seem out of left field. But do your research, for example, the Pu-erh market is rife with forgeries and has seen wild swings over the past twenty years.

Yesterday, SkyBridge Capital’s Anthony Scaramucci and Vincent co-founder Slava Rubin discussed the upcoming election and what you need to know as an investor. Watch a replay now!

🏡 Real estate fund performance: Both public and private funds have underperformed the market in 2024, with public REITs returning just 2.2% compared to the S&P 500’s 14.5%, and the largest 25 private core funds declining in value by 10% due to a heavy investment in office and industrial sectors.

🤖 Newsom vetoes AI bill: The California governor vetoed the controversial SB 1047, which would have set new regulations on the AI industry. The bill was opposed by companies like OpenAI, Meta and Microsoft, but supported by Elon Musk and Anthropic.

💵 Investment-grade debt: Private lenders have already sold over $21 billion in high-grade bonds in 2024, the most ever in a single year.

🚀 Chime IPO: The startup that offers consumers bank-like services reportedly hired Morgan Stanley to lead its IPO, which has a 2025 target and will be a highly anticipated bellwether for the fintech sector.

🥊 Ali’s glove: The left-handed glove worn by Muhammad Ali (then known as Cassius Clay) in his 1963 fight against Henry Cooper has been bid up to ~$670,000 and the auction house is hoping to hit at least $5.3 million by the time it ends on October 31.

🏢 Multifamily momentum: Higher cap rates, lower debt costs and stable vacancy rates should all make it easier for buyers, which should boost deal activity in the multifamily market.

🪙 CZ released: Crypto exchange Binance founder CZ Zhao completed his 4-month prison sentence and announced his intent to invest some of his $30 billion fortune in blockchain, AI and biotech startups.

Twelve different tracts of land featuring active blueberry farms are now up for auction, totaling 650 acres and ranging in size from 5 to 119 acres. The land is located in Western Michigan, between Grand Rapids and Kalamazoo, and are just five miles from Lake Michigan. Between the tracts, there are 469 acres of planted blueberries, with a mix of drip and overhead irrigation installed, and there is no farm lease for 2025, so buyers can operate themselves or lease to a new operation.