OpenAI – Empty Table

There is not much on the table for public market investors.

• The latest raise of $122bn is, I assume, the last raise before OpenAI goes public, but at a post-money valuation of $852bn, there is not an enormous amount (if any) value left on the table for public market investors.
• OpenAI has closed what is probably the largest fundraising ever with $122bn raised (not all at once) mostly from 3 large investors which looks to me like it will take the company through to IPO.
• Amazon is investing $50bn ($15bn up front and $35bn at IPO or AGI) while SoftBank and Nvidia are putting in $30bn each.
• This leaves $12bn which is split between the usual suspects and for the first time, retail investors, who make up $3bn and have come in through investment vehicles run by investment banks and Ark Invest.
• This does not mean that OpenAI is about to break-even as the days of companies making money and generating cash when they go public is long over, but it does mean that visibility into OpenAI’s finances is about to get much better.
• This is because all companies that go public have to provide at least 3 years of audited trading history, and I suspect that this is going to make very interesting reading.
• This is because OpenAI’s business model is challenged both from a financial and governance perspective.
  • First, Financial: where OpenAI has to make hundreds of billions of dollars in revenue just to cover its depreciation charge.
  • OpenAI has said that it intends to invest $1.4tn in infrastructure over the next 5 years or so, meaning that its depreciation charge alone will be somewhere in the region of $200bn per year.
  • OpenAI’s current annualised revenue run rate is somewhere around $30bn, which I would guess needs to increase around 10x to break even.
  • Google is arguably one of the greatest business models ever created and generated $402bn in revenues in 2025, which gives an indication of how steep the hill that OpenAI has to climb is.
  • This is why it is focusing on monetising the 800m+ users that don’t pay it a cent, but I fear that even this may not be enough.
  • This is because OpenAI’s performance advantage is narrowing very quickly, and it has Google (and others) snapping at its heels.
  • Consequently, I am at a loss to work out how OpenAI will cover its costs, let alone earn a return for investors, and it is important to remember that the equity of a company that makes no money is worth nothing.
  • Second, corporate governance: which remains at best a fudge.
  • This is because OpenAI was founded as a non-profit but as the economic opportunity became clear, a for-profit part of OpenAI was created to address that opportunity.
  • The obvious conflict of interest almost caused the implosion of the company at the end of 2023, which resulted in the fudged compromise that exists today.
  • The for-profit entity is now a public benefit corporation (PBC), which is ultimately overseen by its shareholder and sister company, The OpenAI Foundation.
  • The OpenAI Foundation controls the PBC as it can hire and fire all members of the PBC’s board.
  • This is another conflict waiting to happen, and, in my opinion, represents a significant risk to OpenAI’s business.
• When the IPO comes, it will need to be at a valuation higher than $850, leading me to think that OpenAI will be shooting for a valuation of around $1tn.
• To have the same valuation as Nvidia (arguably a far better and much better run company), OpenAI would need to report net profit of $47.6bn, which is not far off double its current annualised revenues.
• This will be a tall order under almost any scenario within the next 5 years or so, and so I would buy Nvidia over this any day of the week.
• This is where I see the IPO potentially getting into trouble, and if the market refuses to pay $1tn, it could trigger a significant correction in terms of valuation of AI stocks.
• This is something I don’t want to be anywhere near, but with a forward 2026 PER of 21.0x, Nvidia looks to me to have already priced this in.
• Nvidia is starting to look defensive and attractively valued.