OpenAI’s US$157 billion valuation, now 82% higher, has a bubble-like feel — ‘The valuation is around 15 times forward revenue basis’: asset manager
https://www.afr.com/chanticleer/ghosts-of-the-venture-capital-bubble-haunt-openai-s-229b-moment-20241003-p5kfm8
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Excerpts from [article](https://www.afr.com/chanticleer/ghosts-of-the-venture-capital-bubble-haunt-openai-s-229b-moment-20241003-p5kfm8) by James Thomson:
*[…] OpenAI, the creator of ChatGPT, announced on Wednesday night that it had completed a $US6.6 billion funding round that will value the company at a staggering $US157 billion, or 82 per cent higher than the $US86 billion valuation it last traded at earlier this year.*
*[…] It’s wrong to compare a company such as OpenAI, which is at the vanguard of an important technological revolution, to WeWork, which had one of the dumbest business models (expensive long-term lease obligations matched with an inherently short-term customer base) in history.*
*But it is notable that one of the biggest investors in OpenAI’s latest funding round is Japanese giant SoftBank, which is reported to have invested US$500 million.*
*SoftBank and it’s talismanic founder, Masayoshi Son, were famously among the last punters at the table at WeWork — the investment giant was the leader of a January 2019 capital raising that valued Neumann’s [WeWork] at $US47 billion and reportedly pumped $US11.5 billion of equity and $US2 billion in debt into the co-working business.*
*[…] But Son is not the only ghost of the pandemic froth to appear on the scene at OpenAI.*
*Tiger Global Management, a firm which invested in start-ups at the incredible rate of one a day in 2021, and subsequently suffered big losses on many of these bets, invested US$350million in OpenAI.*
*[…] Altman appears to recognise that the competition is circling; why else would the terms of the funding round stipulate that investors are not allowed to invest in OpenAI’s rivals, such as Anthropic, Safe Superintelligence and Elon Musk’s xAI?*
*Further, the nagging suspicion that generative AI won’t generate the revenue or profit promised by the investment boom won’t go away any time soon.*
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Excerpts from [article](https://www.afr.com/technology/local-investment-minnow-snags-spot-in-9-6b-openai-capital-raise-20241004-p5kfu4) by Tess Bennett:
*[Boman executive director] Ms Zhuang said OpenAI’s big valuation – which puts it on par with companies such as Uber and Goldman Sachs – “was reasonable”.*
*She noted the company expected to generate between $US8 billion and $US10 billion in annual recurring revenue next year. “The valuation is around 15 times forward revenue basis. It is not cheap, but it’s definitely not that expensive as well. Considering the opportunity the company can achieve in the future, I think it is a reasonable valuation,” she said.*
I’m going to enjoy it when the AI bubble bursts.
Absolutely *nothing* of value will be lost.
Meh, as a long as they keep delivering useful and innovative products (emphasis on useful, cryp.. not you) together with daddy NVIDIA at the vanguard they’ll keep getting that tag until the next recession comes, capital influx is disrupted and then most will say “see, told ya”
Let’s hope open models like the one META develops keeps catching up and pushing them further.
That valuation is interesting. On the one hand, they have barely even bug integration with smartphones so they definitely have a massive opportunity for growing revenue. On the other hand, Apple is positioning themselves to extract every last drop of profit for themselves while weakening the AI services themselves by making them interchangeable. Tough balancing act!
ChatGPT will be Integrated into almost every business across the world. It will be in smart phones, autonomous cars, TVs, and more.
I think the valuation is actually underestimating how big ChatGPT will be.
My 2c: the ML scaling laws are still holding up and inference time scaling seems smooth too, there is a lot of talk about bubbles and diminishing returns, but I think its premature, it will level off eventually but we’re apparently still in the exponential phase, once it levels off ill talk about bubbles, but these tech companies literally can’t stop scaling until it does. Thats just the nature of this, we have to see how far it goes and maybe it still costs too much, but that isnt going to stop it
DON’T LET ELON BUY IT!!!!
15 times is incredibly low for a tech company.
Don’t disagree it’s overvalued, but this is just the dot.com bubble all over again.
So will be everywhere, before it finds where it should be.
Surely we can just ask chatgpt what openai is worth? Cut out all the analyst middlemen, so to speak.
What revenue?
It has potential to grow but it’s a bubble at the beginning. Never get into something like if it’s so overvalued. Its bound to fail.
Who makes this valuation??
Google is looking very attractive if OpenAI is worth this much