OpenAI is poised to become the highest-valued IPO in history.

OpenAI is poised to become the highest-valued IPO in history.

According to our latest research, OpenAI is about to go public and is expected to become the highest-valued AI company in its class—this "expensiveness" isn't reflected in its market capitalization, but rather in the price investors pay for every unit of the company's "business quality." The company's upcoming financial disclosures will test whether this high premium is well-deserved or merely a product of market hype.

Anthropic, a leader in artificial intelligence, has already achieved profitability and its revenue is growing exponentially. In contrast, OpenAI continues to lose money under Sam Altman's leadership. The company is essentially a non-profit organization, founded by Musk to contribute to humanity, but Altman inexplicably turned it into a hybrid non-profit/profit ownership structure.

OpenAI's path to profitability largely depends on a contract with an expiration date. In April of this year, the company renegotiated its revenue-sharing agreement with Microsoft, capping total revenue sharing payments at $38 billion until 2030; this move is expected to save the company between $70 billion and $97 billion in expenses. Without this cap, the company would be unable to achieve positive free cash flow. Investors valuing the IPO will have to rely on an agreement—and the most crucial terms of that agreement are yet to be finalized.

While the company's revenue figures are undeniable, its underlying economic model is unbalanced. In the first quarter, OpenAI's revenue reached $5.7 billion; however, with an adjusted operating margin of -122%, the company incurs $2.22 in costs for every $1 of revenue earned. To reasonably support its $852 billion valuation, the company must generate between $95 billion and $105 billion in free cash flow by 2030. However, based on its first-quarter financial data, the company is projected not only to fail to achieve its profitability target by 2030, but also to face losses of $10 billion to $30 billion.

In our AI Business Quality (AIBQ) rating system, OpenAI ranks last among its competitors, scoring only 4.8 out of 10. At a valuation of $852 billion, this means investors paid a staggering $177.5 billion for each AIBQ score point—11.8 times more than investors paid for a similar score point at Databricks. Meanwhile, its main competitor, Anthropic, is also preparing for an IPO, and its various metrics show stronger competitiveness: its annualized recurring revenue (ARR) is running at a higher rate (estimated at $47 billion, while OpenAI's is approximately $25 billion to $33 billion); its path to profitability is clearer and faster; in addition, in terms of enterprise market share, Anthropic also leads OpenAI with a 40% share (the latter has a 27% share).