Investors Question $850B Valuation and 28x Sales Multiple
Investment banks testing the waters for a potential OpenAI IPO are facing a cool reception from public market investors, according to a March 9th report from The Information. The central point of contention is the company's valuation, which is being established at $850 billion in a current funding round. This figure implies a price-to-sales ratio of approximately 28 times its projected 2026 revenue, a multiple that is more than double the roughly 12x ratio of AI chip giant Nvidia. This steep premium has made many institutional investors cautious.
Prominent investors have openly questioned the logic behind such a high valuation. Bob Lang, founder of Explosive Options, stated he would likely not invest at that price, arguing the real beneficiaries would be early private investors. Veteran short-seller Jim Chanos offered a stark comparison:
Nvidia basically has a monopoly, is growing like a weed, has tremendous margins and cash flow. Why would you give OpenAI a higher multiple?
— Jim Chanos, Founder, Chanos & Company.
Unprofitable Until 2030, OpenAI's Cash Burn Worries Market
Compounding the valuation concerns is OpenAI's own projection that it will continue to lose money until at least 2030. This extended timeline to profitability is unsettling for public market investors who are wary of financing years of significant cash burn. The core risk is that the company may need to raise additional capital post-IPO, potentially diluting the equity of existing shareholders. Some investors have already indicated they may consider shorting the stock upon its debut, betting against the market's tolerance for such a prolonged lack of profit.
Mark Malek, Chief Investment Officer at Siebert Financial, noted he would approach an OpenAI investment with a strictly limited position, drawing a parallel to his strategy with Palantir. However, he sees OpenAI as a riskier bet due to its massive, fixed infrastructure costs. "Palantir is driving a Formula One car, and OpenAI is driving a cargo ship full of freight," Malek explained, highlighting Palantir's greater ability to adjust costs by cutting staff compared to OpenAI's deep investment in data centers.
Anthropic's Rise Diverts Capital and Attention
The IPO landscape is further complicated by the strong emergence of rival Anthropic. At a recent Morgan Stanley conference, CEO Dario Amodei revealed that Anthropic's annualized revenue run rate had doubled to what a source corrected to be over $3 billion, not $20 billion, with a valuation from its latest funding round reaching $18.4 billion. The company is gaining significant traction with enterprise clients willing to pay a premium for its AI tools, such as the Claude Code programming assistant.
Investors are increasingly viewing Anthropic as a more disciplined and potentially more sustainable investment. Reports suggest its projected costs for AI model training and operations are significantly lower than OpenAI's. This capital efficiency has led some market participants, including Jim Chanos, to state a preference for Anthropic's more prudent business model, positioning it as a formidable competitor for investor capital in any future listing.
