Elon’s ChatGPT Gambit

Elon’s ChatGPT Gambit

One day after OpenAI ran a Super Bowl commercial for ChatGPT that left viewers cold… Elon Musk submitted a bid to buy the company.

➢ Sidebar: It seems all the AI-oriented Super Bowl ads fell flat — a far cry from the crypto ads three years ago. Needs more Larry David?

“A consortium of investors led by Elon Musk is offering $97.4 billion to buy the nonprofit that controls OpenAI,” says this morning’s Wall Street Journal — “upping the stakes in his battle with Sam Altman over the company behind ChatGPT.”

As you might be aware, Musk was one of OpenAI’s co-founders in 2015. He and Altman had a falling-out no later than 2020, when Musk hit out at what he thought was OpenAI’s lack of transparency. By last year, Musk sued OpenAI — accusing it of abandoning its nonprofit mission to develop AI for the betterment of humanity.

Indeed, Altman wants to convert OpenAI to a for-profit company.

Which, when you get right down to it, it already is. I mean, look at that Super Bowl commercial. I assure you Fox didn’t pass up $16 million in revenue so it could give 60 seconds of airtime to a nonprofit for a public service announcement.

“It’s time for OpenAI to return to the open-source safety-focused force for good it once was,” says a Musk statement furnished by his lawyer.

Altman has been vociferous in rejecting the offer.

That was some pretty good trolling — and he should have just left it there.

But no, Altman felt compelled to make the rounds on financial TV this morning. He told Bloomberg TV that OpenAI is “not for sale.” He told CNBC Musk is simply trying to “slow down a competitor.”

Sorta makes you wonder if he’s nervous about the conversion to a for-profit going through. Among the many thorny questions still to be answered is how much equity OpenAI’s investors — like Microsoft — would get in the new company.

Of course, it’s fair to ask whether Musk is serious.

On our internal Paradigm e-chat, Jim Rickards’ right-hand man Dan Amoss pointed out that only last month, The Wall Street Journal reported that OpenAI is talking with deep-pocketed investors about a new round of funding that would value the company as high as $300 billion.

Taking that figure at face value, $97 billion is a ridiculously lowball offer.

On the other hand, “Elon implies OpenAI should go back to open source,” Dan says — meaning the code would be available for anyone and everyone to tinker with. “If so, what exactly is the business model? The amount he’d pay might as well be burnt in a bonfire.”

We’re not going to spend any more time harping on this today. It’s an ego contest.

And there’s no investment angle, really.

Besides, Musk has much bigger fish to fry in conjunction with Donald Trump — and there is an investment angle there.

“From their plans to cut government regulations and lower taxes for American businesses, all of this benefits a specific group of stocks above all the others,” says Paradigm’s AI and crypto authority James Altucher.

And James believes the floodgates will open this Friday — “when a little-known government document reveals trillions of dollars in financial transactions that have been quietly taking place on Wall Street for weeks.

“I believe this will mark the beginning of a new paradigm shift in the stock market,” James says — indeed, the start of an epic bull market for a select group of stocks. (Not the ones you read about all the time.)

As you might suspect, James believes you’ll get the best results if you act before Friday. Details at this link.

Jitters on Main Street

It’s not just Wall Street that’s jittery about Trump economic policies. So is Main Street.

Or so we’d conclude from the monthly Small Business Optimism Index, out this morning from the National Federation of Independent Business.

As we chronicled late last year, the index leaped higher after Trump’s election to its highest levels since 2018. But the January survey shows the number pulling back from 105.1 to 102.8.

And then there’s the “uncertainty” portion of the survey — where higher numbers are bad. This number eased off after Trump’s election… but it spiked in January to its third-highest reading in history. (And this survey’s been conducted for over 50 years now.)

Of course, the NFIB’s membership leans Republican, so NFIB chief economist Bill Dunkelberg had to choose his words carefully in describing these results.

“Overall,” he said, “small-business owners remain optimistic regarding future business conditions, but uncertainty is on the rise. Hiring challenges continue to frustrate Main Street owners as they struggle to find qualified workers to fill their many open positions. Meanwhile, fewer plan capital investments as they prepare for the months ahead.”

On the part of the survey where respondents are asked to identify their single-most important problem, “quality of labor” is tied with inflation — both cited by 18%. But taxes are right up there at 17% — and that number is higher than it was a month earlier. Hmmm…

After an up day yesterday, Mr. Market is struggling for direction.

At last check, the S&P 500 is almost ruler-flat at 6,065. The Nasdaq is down fractionally, the Dow up fractionally.

Among the crosscurrents in play: The White House says there will be no exceptions to the steel-and-aluminum tariffs announced over the weekend. Meanwhile, Federal Reserve chair Jerome Powell is telling Congress there’s no need “to be in a hurry” to resume interest rate cuts.

Gold dipped below $2,900 earlier today, but it’s back above that level as we write. Silver, however, is back under $32. Crude is back over $73. Bitcoin continues to oscillate around $97,000.

The (Indian) Elephant in the Room

It’s one of the strangest laws on Uncle Sam’s books. And Donald Trump is calling a time-out on enforcement.

Yesterday he signed an executive order directing the Department of Justice to deliver “revised, reasonable enforcement guidelines” on the Foreign Corrupt Practices Act.

This law, enacted in 1977, punishes American companies that bribe government officials in other countries. Over the years, it’s been used against everyone from Goldman Sachs to the mining giant Glencore.

The White House says the law puts U.S. firms at a disadvantage because they can’t resort to practices that are “common among international competitors.”

That’s the least of it. Really, what business is it of the U.S. government if an American business bribes a foreign official? After all, bribery is a common practice in our own country; it just gets gussied up under the rubric of “lobbying.”

Absent from the coverage of this story in U.S. media is how Trump’s order might affect one of the weirder prosecutions pursued by the Biden administration.

This isn’t even a prosecution of an American company or person. Instead, the feds charged the Indian billionaire Gautam Adani with bribing Indian government officials to snag juicy solar-energy contracts.

Yes, Washington is prosecuting someone overseas for bribing his own government officials — on the theory that it somehow hurt Adani’s American investors. (Did any of Adani’s American investors complain? No, they did not.)

While U.S. media are ignoring this angle, Indian media are all over it: “The pause and the review is being seen as a relief to the Adani Group,” says The Economic Times, “but it remains to be seen what stand the DoJ takes after [a] six-month review period.”

As I wrote when the feds charged Adani last November, if you’re in Washington, D.C... and if your status as “the world’s sole superpower” is hanging by a thread… and if the nation-state that’s home to one out of six humans on Earth is deftly playing off Washington against Beijing and Moscow…

… then it’s probably a dumb idea to prosecute the second-richest guy in that country on a flimsy pretext, especially when he’s besties with the guy who’s been prime minister for over 10 years now.

Maybe someone in the Trump administration recognizes this indictment will only push New Delhi closer to its fellow BRICS countries — you know, the ones trying to escape the dollar’s worldwide dominance?

“3.69 Cents for Your Thoughts” Doesn’t Sound Right

In reading this morning about Donald Trump’s order to the Treasury to stop minting pennies — because the cost of production is 3.69 cents each — a flash of fury came over me.

But I don’t have to write about it today, because Rude Awakening editor Sean Ring beat me to the punch. (Living in Europe, he gets a six-hour jump on me.)

“What gets my goat,” he wrote, “is that inflation is so damn out of control that there’s a verifiable reason to stop making them [pennies].

“It’s as if the new USG is saying, ‘We’re never going to get prices back down to the level you wanted them at (deflation), but we’ll do our best to keep them from rising too quickly (disinflation).’”

The investment angle, you wonder? Even with gold trading near record levels, it’s worth adding to your existing holdings — or starting to accumulate if you haven’t already. Read, learn, enjoy.

Mailbag: Swamp Rats, Silver

In response to our main topic yesterday — the DOGE boys descending on the Pentagon — a reader writes…

“Definition of a swamp rat: Any politician (past or present), government bureaucrat or judge, regardless of political party, race, religion, gender or creed, that puts up any roadblock or argument in an attempt to thwart a full and complete audit of the Department of Defense with associated prosecutions for malfeasance.”

“Hi, Dave — I'd like to push back and question the assertion that silver needs to outperform gold consistently for this rally to be legitimate,” a reader writes.

“Why is this a requirement? I understand that's how it went in the big metals rallies in '79–'80 and again in 2011, but there is the old adage that past performance does not guarantee future results, or a similar pattern.

“Could it not be different this time? Could gold, much more a purely money metal than silver, not lead the run-up and silver, with its dual role as both money metal and industrial metal, be the laggard?

“I'm thinking if we truly are in a recession, that argument could be made if the industrial sector itself is stagnant or declining, and we have the central bank gold-buying spree over the past three years still going full tilt, as Jim Rickards and others have pointed out, and the recently released World Gold Council report has proven.

“That factor could not only put a solid floor under the price; it could keep pushing that floor higher while silver's industrial facet could act as a boat anchor holding it down, countering the action of its other identity as money unless its monetary aspect takes over, possibly with central bank buying as a driver, like with gold… Does this make sense?

“Thanks — I'm also very interested to see what Elon and crew find in the most offensive 'defense' department there ever was. Keep up the good work!”

Dave responds: All good points.

That said, silver’s industrial demand is… well, maybe not recession-proof, but certainly recession-resistant. People in developed countries will still want their electronics and China will continue its relentless build-out of solar panels. And there’s not that much silver from those sources that gets recycled.

More to the point, the market for silver is much smaller than that for gold — which means that small moves in demand can translate to big moves in price. So far, that’s not materializing.

Oh well, just an opportunity to keep stacking…

Best regards,

Dave Gonigam
Managing editor, Paradigm Pressroom's 5 Bullets