Is Wall Street probing the OpenAI IPO, and are investment firms not interested?

Investors generally recognize OpenAI’s leading position in the AI competition landscape but remain cautious about whether it can be reasonably valued in the public market.

Article by: Dong Jing

Source: Wall Street Insights

OpenAI may still be at least six months away from going public, but Wall Street’s pre-market buzz has already begun quietly. Several investment banks are actively engaging with public market investors to gauge market sentiment regarding the company’s IPO prospects—yet the responses have been far more lukewarm than expected.

On March 9, according to tech media The Information, insiders revealed that multiple banks competing for OpenAI’s IPO underwriting business have started “sounding out” public investors. The Information interviewed 11 public market investors, most of whom do not currently hold OpenAI shares.

The respondents generally adopt a cautious stance toward the IPO, with key concerns centered on two points: first, unclear profitability prospects—OpenAI predicts it will continue burning money at least until 2030; second, overvaluation—currently, the company is valued at $850 billion in a new funding round, which is 28 times its expected 2026 revenue, far exceeding Nvidia’s roughly 12 times price-to-sales ratio.

The report suggests that the market’s “cool” sentiment reflects deep-seated contradictions facing what could be the largest IPO in history: investors widely acknowledge OpenAI’s leading role in AI competition but remain skeptical about its ability to achieve fair valuation in the public market. Meanwhile, the rapid rise of competitor Anthropic is further diverting investor attention and enthusiasm.

Valuation Dispute: 28x Price-to-Sales—Where’s the Premium?

OpenAI is currently raising funds at a valuation of $850 billion, with participants including Nvidia, Amazon, and SoftBank. This figure has already deterred many public market investors, and the IPO price could be even higher.

Based on projected 2026 revenue, $850 billion corresponds to a roughly 28x price-to-sales ratio. In comparison, Nvidia, regarded as a benchmark in AI investments, currently has a P/S ratio of about 12.

According to Bob Lang, founder of trading firm Explosive Options:

“I do believe OpenAI is an excellent company with a strong moat, but I don’t think any valuation on the first day of trading is a good deal for investors.”

He indicated that he is unlikely to participate in OpenAI’s public market investment, especially given its valuation multiple exceeding Nvidia’s.

Lang also pointed out that the true beneficiaries of this IPO will be early investors who already hold shares and large-scale cloud computing companies—who will use this as an opportunity to cash out.

Jim Chanos, a well-known short seller, referenced Nvidia as a benchmark to question OpenAI’s valuation logic:

“Nvidia essentially monopolizes the market, with rapid growth, high profit margins, and ample cash flow. So why should OpenAI be valued higher?”

Profitability Path: Burning Money Until 2030—Can the Public Market Buy It?

According to reports, OpenAI itself forecasts it will remain unprofitable at least until 2030. This timeline unsettles public market investors, who are accustomed to scrutinizing profitability.

Some investors worry whether the funds raised from the IPO can support the company until it turns profitable or if it will need to raise more capital later, diluting existing shareholders.

Mark Malek, CIO of Siebert Financial, said that even if OpenAI struggles to achieve significant profits in the short term, he would consider building a position after the IPO but would strictly control his exposure—similar to his strategy with Palantir.

Palantir currently has a P/S ratio of 49, with growth far surpassing its peers, but Malek believes Palantir’s risks are lower than OpenAI’s because of its more flexible cost structure.

“If Palantir loses a government contract, that’s bad, but they can lay off staff. If you spend five years building a data center, you can’t just say ‘forget it.’ Palantir is like a Formula 1 racing team, while OpenAI is like a fully loaded cargo ship.”

JPMorgan analysts noted in a January report that OpenAI’s move to introduce advertising in ChatGPT helps retain users, but also observed that after announcing large-scale chip and data center spending plans, customer sentiment toward OpenAI was “mixed.”

Not everyone is just watching—some investors have explicitly stated that once OpenAI goes public, they will consider shorting its stock, betting that the public market’s tolerance for its long path to profitability is limited.

Chanos shares a similar view. His core message to clients is: “You should go long on chip production and short on chip storage.” The implication is that operating data centers is not inherently high-return, and OpenAI’s business model heavily depends on large-scale computing infrastructure investments.

Chanos also pointed out that current financial information on OpenAI is severely lacking, making in-depth analysis difficult. However, he expects that once OpenAI officially files for an IPO, there will be fierce debate about its competitive landscape:

“Is this a winner-takes-all scenario, or is the market more fragmented like cloud computing? Or will one company become the standard and maintain it long-term like search engines? Currently, models are still constantly surpassing each other.”

Anthropic’s Disruption: Competition Diverts Funds and Attention

OpenAI’s IPO journey also faces potential pressure from competitor Anthropic.

At this week’s Morgan Stanley Annual Technology Conference, Anthropic CEO Dario Amodei disclosed that the company’s annualized revenue run rate has doubled to $20 billion. Recently, Anthropic completed a new funding round, valuing the company at $380 billion, with strong sales momentum for enterprise products like the AI programming tool Claude Code.

The Information previously reported that Anthropic expects its costs for AI model training and operations over the next few years to be significantly lower than OpenAI’s. Some investors are beginning to believe that, thanks to its success in the enterprise market—where clients are willing to pay premiums for AI services—Anthropic’s long-term profitability could surpass that of OpenAI.

As Anthropic prepares for its own IPO, the two companies’ offerings may compete, further dispersing investor funds and enthusiasm. Investors like Chanos favor Anthropic’s more restrained approach to compute investments, viewing it as a more cautious and sustainable business model.