Cory Weinberg, The Briefing: The Cynic’s Guide to OpenAI’s Megaround, The Information, Oct. 2, 2024:
The biggest question is: Will OpenAI ever be a good business? It’s debatable right now. At least on a sales multiple basis (13 to 14 times next year’s forecasted $11.6 billion revenue), some investors can justify it without embarrassment.
But investors in the latest round probably need OpenAI to eventually become a roughly $1 trillion company to get a strong return. That means at some point the startup will have to become a cash flow machine rather than a cash incinerator.
Of the seven companies with over $1 trillion in market cap currently, the median free cash flow from the past year was $57 billion. In that regard, OpenAI, which is chasing growth and spending heavily on computing capacity, has quite a way to go. (For what it’s worth, Fidelity investing in the latest round should mean we get a regular check-in on how OpenAI’s valuation is shifting, at least in the opinion of Fidelity, which needs to make its startup valuations public.)
To be sure, even if OpenAI’s latest benefactors don’t believe it can get to $1 trillion, many of them have all sorts of ulterior, strategic reasons to back the startup.
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