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Peter Thiel tells investors that scale will determine success in the AI race.

Peter Thiel’s Founders Fund is doubling down on its biggest artificial intelligence bets, embracing a concentrated strategy as rivals spread their bets across a wide swath of startups.

Among them are OpenAI, data center builder Crusoe and General Matter, a nuclear fuel startup the firm has incubated, Founders Fund said at its recent annual general meeting for investors. In contrast, other venture firms have poured money across the AI landscape, often backing multiple companies competing in the same markets.

Founders Fund’s decision to invest more in its biggest AI companies is notable because Thiel has warned of a bubble and Founders Fund has recently been relatively cautious about investing in generative AI startups. The firm first put money into OpenAI in early 2023 but didn’t invest as heavily in other model developers and app companies as peers.

Thiel used the 20-year-old firm’s annual general meeting last month to lay out its plan to concentrate its investments in a handful of AI companies. Speaking to the firm’s hundreds of limited partners and Silicon Valley luminaries in a video presentation, Founders Fund partners outlined plans to stand behind a single company operating at each level of the AI business, according to notes prepared by an attendee and people familiar with the meeting.

One of them is OpenAI. The company’s CEO, Sam Altman, took the stage with Thiel to promote their shared view that the winners in AI will be companies that can get to enormous scale the fastest. That strategy justifies Founders Fund’s recent roughly $1 billion investment in OpenAI at a $300 billion valuation when including more than $40 billion in new capital, one of the biggest investments in the firm’s history.

The OpenAI investment fits with the longtime strategy of Founders Fund, led by Thiel and a handful of other partners, to concentrate funds into a small number of its favorite companies, such as defense contractor Anduril. It has profited from big early bets on companies including Airbnb and Palantir and has developed a reputation for going against the grain, making an investment in SpaceX when others were not eager to put money behind rocket launches.

Founders Fund said its $671 million total investment in SpaceX beginning in 2008 has turned into a $20.3 billion position when including its current holdings and the shares it’s sold, a more than 30 times gain for the funds.

Altman and Thiel have a long history. Thiel invested in Altman’s venture fund, Hydrazine Capital, more than a decade ago, and OpenAI listed Thiel as one of its initial donors when it began in 2015.

Speaking at the meeting, Altman said OpenAI would continue to use its billions in capital to fund advanced chips and data centers, while ramping up hiring to generate more business. The company is now valued at $500 billion, based on an employee share sale this week.

Altman said that makes OpenAI the most valuable company per employee in the world, and it could go public in the next couple of years if the conditions are right. An OpenAI spokesperson said he wasn’t at the event, so he couldn’t comment on what Altman said.

Founders Fund’s rivals such as Andreessen Horowitz and Lightspeed Venture Partners have spread their bets widely across several AI model makers and application startups. The divide in how venture capitalists approach AI could determine which investment firms and AI companies emerge stronger from the current funding boom. The dot-com frenzy led to a shakeout in the venture capital industry after many funds had big losses.

Founders Fund made an early foray into AI in 2011 with an investment in DeepMind before the startup’s sale to Google. As other investors have begun piling into AI startups and driving up prices, Founders Fund has applied extra scrutiny to potential AI investments, said one person familiar with the firm’s approach.

Thiel has publicly compared the current state of AI to the dot-com boom. “The rough analogy is that AI in 2024 is like the internet in 1999,” he said on a podcast last year. “On a business level, it’s very, very treacherous.”

Founders Fund’s AI strategy aligns with Thiel’s long-held belief that the best investments are in companies with the potential to create monopolies instead of competing in existing markets. It’s also planning to make a smaller number of investments from its growth-stage funds, which are funding its biggest AI bets.

The firm told investors at the meeting that it plans to back about 10 companies in its most recent $4.6 billion growth-stage fund. That compares to 15 companies in its second growth fund and 31 companies in its first growth fund, both of which were smaller in size.

The first $1.7 billion growth fund raised in 2020 had a 10% net of fees internal rate of return through the first quarter this year, while the second $3.4 billion growth fund raised in 2022 had a 24% IRR through the same cutoff date, said one person familiar with the returns.

Founders Fund said AI coding startup Cognition, one of its biggest bets, is on track to beat its target of generating roughly $200 million in annual recurring revenue by the end of the year from its Devin software tool. The firm recently led a $400 million round of funding valuing Cognition at $10.2 billion, including the new cash, after first investing early last year.

Founders Fund also said at the meeting it plans to invest in a new round of funding for data center builder Crusoe at a $10 billion valuation. The firm invested $240 million in the company last year. Crusoe last month completed the first phase of its Abilene, Texas, data center campus for Oracle, which is supplying OpenAI with cloud computing.

General Matter, a startup building U.S.-based uranium enrichment facilities, is another example of how Founders Fund is concentrating its AI bets. The firm incubated General Matter, co-founded by Founders Fund partner Scott Nolan, and led its first two funding rounds, giving Founders Fund a 27.5% stake, it said at the meeting.

Founders Fund thinks General Matter will become a critical supplier of uranium to companies building small nuclear reactors to power AI data centers. The company is aiming to begin operations at a planned uranium enrichment facility in Paducah, Ky., by the end of the decade.

One area Founders Fund is shying away from is AI chips, which Nvidia dominates. Of the five categories of AI companies the firm laid out at the meeting, chips was the only one where it hasn’t yet made any major bets.

Founders Fund also hasn’t backed any of OpenAI’s major competitors in AI model development, like Anthropic or xAI.