OpenAI’s Sam Altman Says an IPO Won’t Happen This Year. Should This Make You Cautious About AI Stocks, or Is It Time to Pile Into Certain AI Bargains?

In the investing world, all eyes have been on artificial intelligence (AI) stocks in recent years. These companies offer the potential to revolutionize business across industries, supercharge innovation, and more. And this has resulted in explosive earnings growth for some and the promise of additional earnings power on the horizon.

Against this backdrop, investors have piled into AI stocks and have also been on the lookout for any new AI investing opportunities in the form of initial public offerings. Chip designer Cerebras Systems and space and AI company Space Exploration Technologies each launched operations this year and saw their share prices soar in the early days of trading.

And in recent months, investors have been particularly excited about the future IPOs of AI labs OpenAI and Anthropic. Both of these companies filed confidentially with regulators, suggesting an operation would be upcoming. But last week, amid general concerns about rapid AI progress and the subject of safety, OpenAI said its IPO wouldn't happen this year. Is this a signal to avoid AI stocks -- or should you rush to get in on certain AI bargains? Let's find out.

How the AI environment has evolved

So, first, let's consider how the AI environment has evolved in recent years and months. In the earlier stages of this boom, researchers trained large language models and a variety of companies, from chip designers to cloud platforms, made this possible -- and saw earnings explode higher. These models have become increasingly powerful and are now being more frequently applied to real-world use. As a result, the revenue opportunity for many companies involved is rapidly growing, AI is helping customers from individuals to companies improve performance, and researchers continue to develop more advanced models.

This sounds great, but the one challenge has been safety. In recent times, cyber breaches by OpenAI and Anthropic models without human involvement sparked concerns in Washington, with some lawmakers calling for the research labs to testify before Congress. And just last week, Anthropic chief Dario Amodei, in an essay, urged AI players to control the pace of advanced model updates to ensure safety. Meanwhile, OpenAI chief executive officer Sam Altman, in a Fortune interview, said that the lab wouldn't go public this year.

"An ill-advised moment"

"Given everything happening with safety... now would be an ill-advised moment to go public," he said in the interview.

Now let's consider what this means for AI investing. The move suggests OpenAI is putting its focus on establishing and following safety policies along with peers and aims to enter the market when the general public is confident about the overall safety environment. This is a positive message for AI, so it doesn't change long-term prospects for strong players in this space. It's also positive that leading AI players, from OpenAI to Anthropic and SpaceX, are on the same page regarding this view on safety.

Of course, the safety concerns may weigh on certain AI stocks in the short-term, so investors should prepare themselves for potential volatility. And this means cautious investors might prefer waiting on the sidelines or favoring tech stocks with broad businesses, such as Apple or Microsoft.

But I don't think this news alters the long-term AI opportunity. Leaders are taking clear steps to address risk while at the same time advancing the technology. AI has shown its usefulness in the real world and is boosting earnings and innovation across industries. And today, many quality AI stocks are trading at reasonable and even cheap valuations. For example, AI chip giant Nvidia trades at 23x forward earnings estimates, and cloud giant Alphabet trades at 16x.

Investors may have gotten used to AI stocks delivering quick gains, and so may now worry as they see a dip or certain players stagnate. But I see this as a buying opportunity for growth investors who don't mind some risk. As I mentioned, prospects over the next several years remain solid, and as this translates into ongoing revenue growth, stock prices are likely to follow. All of this means that now may be an excellent time to buy quality AI stocks at bargain levels.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.