The $157B OpenAI Valuation Bull Case

A few weeks ago, we heard about OpenAI’s valuation: $157 billion.

One hundred and fifty-seven billion dollars. Eye-wateringly ludicrous—or is it?

We began racking our brains. Could the AI revolution be led by Sam Altman and the team at OpenAI? Could this actually be a discount for what might become this generation’s printing press, semiconductor, or internet? Or is it grossly overvalued? Are we looking at this generation’s MySpace—a first mover that will eventually fizzle out as challengers rise to become incumbents?

This week, we’re doing something a little different. Michael Brown will make the case that OpenAI is fairly valued, while Colin Ryan will argue the opposite. On Thursday, after publishing both sides, we’ll attach a poll to get your opinion: Is OpenAI overvalued or undervalued?

The Bull Case – In just two months, OpenAI reached 100 million users—faster than Facebook’s historic adoption curve. Facebook revolutionized network effects, and OpenAI is driving even greater AI-driven adoption, reflected in soaring valuation multiples.

As of September 2024, the median EV/Revenue multiple for AI companies is 25.8x. OpenAI’s projected FY 2024 revenue of $3.7 billion (Yahoo! Finance) implies a $95.5 billion enterprise value—short of its $157 billion valuation. However, multiples alone miss key drivers like company fundamentals and market sentiment, which reflects investor confidence in future potential.
Valuing ventures is often more art than science. Traditional multiples fail to capture OpenAI’s profound societal impact, as AI models challenge search engines, teach complex topics, and reshape jobs. This is not just innovation—it’s a societal revolution, comparable to the Industrial Revolution, which, in its day, evolved valuation methods from tangible assets to forward-looking metrics.

Today, EV/Revenue multiples dominate, but even 25.8x underscores OpenAI’s first-mover advantage and disruptive potential. The bull case is clear: at a $157 billion valuation, investors see a bargain, reflecting confidence in OpenAI’s ability to transform industries and societal norms. This valuation represents fair market value, driven by sentiment, expectations, and unmatched potential.