The legendary investment sage Benjamin Graham famously wrote that “in the short run, the market is a voting machine, but in the long run, it is a weighing machine”. When it comes to the current AI boom, the short run may be drawing to a close and the long run is approaching fast.
Over the past few years, private market investors have been maniacally voting for OpenAI and Anthropic, bidding up the target valuations for their planned flotations to about $1tn apiece. The valuations of west coast start-ups are routinely and necessarily based on speculation, given their short history. So, the narrative goes: how can investors possibly miss out on these historic opportunities to achieve godlike superintelligence?
Yet slightly less excitable east coast public market investors will eventually, and more prosaically, discount the hype and weigh these companies’ long-term abilities to generate hard cash (we hope). On that score, there are huge doubts about both companies. Their listing prospectuses will need to be unusually convincing. Great vibes will not automatically translate into sustainable valuations.