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

Written by: Dong Jing

Source: Wall Street Insights

OpenAI may still be at least six months away from going public, but Wall Street’s pre-launch hype has already quietly begun. Several investment banks are actively reaching out to public market investors to gauge market sentiment regarding this ChatGPT parent company’s IPO prospects—and the responses have been far cooler 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 market investors. The Information interviewed 11 public market investors, most of whom do not currently hold OpenAI shares.

Generally, respondents are cautious about the IPO, with main concerns centered on two points: first, unclear profitability prospects—OpenAI predicts it will continue burning money at least until 2030; second, overvaluation—currently 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” response reflects deeper contradictions facing what could be the largest IPO in history: investors acknowledge OpenAI’s leading position in AI competition but remain hesitant about whether it can be reasonably valued 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 valued at $850 billion in a new funding round involving Nvidia, Amazon, and SoftBank. This figure has already deterred many public market investors, and the IPO pricing could be even higher.

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

Bob Lang, founder of trading firm Explosive Options, bluntly stated:

“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 makes sense for investors.”

He indicated he likely would not participate in OpenAI’s public market investment, especially given its valuation multiples exceeding Nvidia’s.

Lang also pointed out that the true beneficiaries of this IPO will be early investors and massive cloud computing companies—those who will use it as an opportunity to cash out.

Jim Chanos, a well-known short seller, used Nvidia as a reference point to question OpenAI’s valuation logic:

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

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

Reportedly, OpenAI itself forecasts it will remain unprofitable until at least 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 OpenAI until it reaches profitability, 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 turn a profit 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’s current P/S ratio is as high as 49, with growth far surpassing 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 a fully loaded cargo ship.”

JPMorgan analysts noted in a January report that OpenAI’s move to introduce ads within 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 already made it clear they plan to short the stock once it goes public, betting that the market’s tolerance for its long path to profitability is limited.

Chanos shares a similar view. His core logic to clients is: “Go long on chip production, short on data center operations.” The implication is that running data centers itself is not a high-margin business, 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. But he expects that once OpenAI files for an IPO, fierce debates about its competitive landscape will ensue:

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

Anthropic’s Disruption: Competitors Divert 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 revealed that the company’s annualized revenue run rate has doubled to $20 billion. Recently, Anthropic completed a new funding round, valuing it at $380 billion, with strong sales momentum for enterprise AI tools like Claude Code.

The Information previously reported that Anthropic expects its costs for training and operating AI models 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 OpenAI’s.

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