Is OpenAI Wildly Overvalued?

We can debate whether public companies believed to benefit from artificial intelligence are in a valuation bubble, might become a bubble or are not in such a bubble. But a recent offering suggests an OpenAI valuation north of $80 billion, for a firm with annual revenues of about $1.8 billion. 

That suggests a revenue multiple of 44.4, much higher than most other firms in the technology business. Of course, some will argue OpenAI’s apparent valuation is appropriate, given its present leadership status in the AI platform space and AI “picks and shovels” markets. 

Consider that high-flying Nvidia has a revenue multiple around 15, for example.  

Company	Revenue (2023)	Valuation (Feb 2024)	Revenue Multiple
OpenAI (Private)	$1.8 billion	$80 billion	44.4
Snowflake (SNOW)	$9.7 billion	$73.9 billion	7.6
Datadog (DDOG)	$1.7 billion	$44.1 billion	26.0
Zoom Video (ZM)	$4.2 billion	$24.0 billion	5.7
Tesla (TSLA)	$81.5 billion	$468.1 billion	5.7
NVIDIA (NVDA)	$33.3 billion	$491.3 billion	14.8

It is too early to say whether such a valuation is warranted or sustainable. But OpenAI is an outlier by most reasonable estimates.