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Yes. This article demonstrates the problem of trying to reason by simple earning analysis alone. You can have to consider the dynamics of the businesses involve

Yes. This article demonstrates the problem of trying to reason by simple earning analysis alone. You can have to consider the dynamics of the businesses involved. OpenAI being worth $100B doesn’t seem ridiculous at all to me. There is a lot of risk investing in such a stock, but given it has gone from nowhere to over $1B in revenue in such a short time, and it has a very strong brand position, is partnered with one of the best run tech companies, has a unique training pipeline, has fantastic connections to important institutions, is the first mover, and has an array of impressive products, you would expect that 1B to easily reach 10B, and reaching revenue of 100B doesn’t seem far fetched. Taking another analysis: if they manage to charge $50 per business user, which isn’t too far from current charges and not that different from say what Microsoft costs, and is a small amount to recoup in productivity gains, then they need 150 million or so users. Office has double that. And of course we can see many other revenue sources, like education. Their biggest challenge will be competition, and that makes it highly uncertain. It’s a very _risky_ stock, but the potential upside is very high. It is not a bubble if the price is driven by expectations of earnings growth.

aurareturn 3y ago
>Their biggest challenge will be competition, and that makes it highly uncertain. It’s a very _risky_ stock, but the potential upside is very high. It is not a bubble if the price is driven by expectations of earnings growth. OpenAI isn't a stock. It's a private valuation. I actually think they'd be well above $100b if they're a public company right now. Just look at how much $MS added in market cap since ChatGPT.
- eggdaft 3y ago
  MS growth has been driven by multiple factors. Lost me at why OpenAI not being floated makes any difference to my analysis?
  - aurareturn 3y ago
    >Lost me at why OpenAI not being floated makes any difference to my analysis? Nothing really. I just wanted to point out that it's not a stock. It's a private company still. Doesn't change your analysis.
philoinvestor 3y ago
I am the writer of the article. I do consider the dynamics of the businesses involved - when I Write about a single company I consider it very deeply, when I write about a basket of stocks, I adjust my message to provide for that. I have written tons about differentiating between business models, and have spoken about that on my recent podcast interview with Value Hive. To get to the punch, Open AI being valued at $100bln may not be ridiculous to you, but it is to me. What is your risk/reward? Abysmal. Even if you hit your targets, no biggie. I have written about Duolingo, which was (and is) considered extremely overvalued, and similarly has a complicated business model. I broke down my rationalisation in this essay here: https://www.philoinvestor.com/p/duolingo-platformizing-learning https://www.philoinvestor.com/p/duolingo-platformizing-learn...
- aurareturn 3y ago
  What insider information/expertise do you have to say OpenAI valued at $100b is ridiculous? Do you have their financial information? Growth rate? Roadmap? Customer pipeline? Have you tested GPT5? Are you a leading AI expert? Have you worked at OpenAI before? I'm not saying that you're wrong. It's just silly to say its valuation is ridiculous when it's a private company.
  - philoinvestor 3y ago
    We know Open AI ARR, competitive landscape, the reason why they raised the capital at that valuation (MSFT's goals). We also know that they DO NOT make money, which isn't great considering that there's a bunch of other competitors ramping up to compete with Open AI. We also know that this is an incredibly dynamic sector/business, which means there's a high chance Open AI may not even get close to achieving its objectives. Roadmap is one thing, how you value it is another. No, far from a leading AI expert, but I don't need to be a leading AI expert to think. Do I need to work at Open AI to make an assessment of the company's current valuation? Come on now...if you've been an investor for long enough you know that employees very rarely have a good understanding of the company they work at. Whether private or public, I have used limited information to make an assessment of the $100bln valuation, and yes for me, it's ridiculous. I do appreciate your feedback however and constructive criticism.

aurareturn 3y ago

>Their biggest challenge will be competition, and that makes it highly uncertain. It’s a very _risky_ stock, but the potential upside is very high. It is not a bubble if the price is driven by expectations of earnings growth. OpenAI isn't a stock. It's a private valuation. I actually think they'd be well above $100b if they're a public company right now. Just look at how much $MS added in market cap since ChatGPT.

eggdaft 3y ago
MS growth has been driven by multiple factors. Lost me at why OpenAI not being floated makes any difference to my analysis?
- aurareturn 3y ago
  >Lost me at why OpenAI not being floated makes any difference to my analysis? Nothing really. I just wanted to point out that it's not a stock. It's a private company still. Doesn't change your analysis.

philoinvestor 3y ago

I am the writer of the article. I do consider the dynamics of the businesses involved - when I Write about a single company I consider it very deeply, when I write about a basket of stocks, I adjust my message to provide for that. I have written tons about differentiating between business models, and have spoken about that on my recent podcast interview with Value Hive. To get to the punch, Open AI being valued at $100bln may not be ridiculous to you, but it is to me. What is your risk/reward? Abysmal. Even if you hit your targets, no biggie. I have written about Duolingo, which was (and is) considered extremely overvalued, and similarly has a complicated business model. I broke down my rationalisation in this essay here: https://www.philoinvestor.com/p/duolingo-platformizing-learning https://www.philoinvestor.com/p/duolingo-platformizing-learn...

aurareturn 3y ago
What insider information/expertise do you have to say OpenAI valued at $100b is ridiculous? Do you have their financial information? Growth rate? Roadmap? Customer pipeline? Have you tested GPT5? Are you a leading AI expert? Have you worked at OpenAI before? I'm not saying that you're wrong. It's just silly to say its valuation is ridiculous when it's a private company.
- philoinvestor 3y ago
  We know Open AI ARR, competitive landscape, the reason why they raised the capital at that valuation (MSFT's goals). We also know that they DO NOT make money, which isn't great considering that there's a bunch of other competitors ramping up to compete with Open AI. We also know that this is an incredibly dynamic sector/business, which means there's a high chance Open AI may not even get close to achieving its objectives. Roadmap is one thing, how you value it is another. No, far from a leading AI expert, but I don't need to be a leading AI expert to think. Do I need to work at Open AI to make an assessment of the company's current valuation? Come on now...if you've been an investor for long enough you know that employees very rarely have a good understanding of the company they work at. Whether private or public, I have used limited information to make an assessment of the $100bln valuation, and yes for me, it's ridiculous. I do appreciate your feedback however and constructive criticism.