Mime-Version: 1.0 Content-Type: multipart/alternative; boundary="6b89c945bd4aac366ac0870fa5760c8bb9555f37059c987a784088f280e9" Subject: =?UTF-8?q?=F0=9F=92=B8_What_$500bn_buys_you_in_AI_(and_what_it_doesn?= =?UTF-8?q?=E2=80=99t)?= From: "Azeem Azhar, Exponential View" To: Hidden Recipient Date: Sat, 6 Sep 2025 08:42:11 +0000 X-Hiring: We are hiring, reach out at header-hacker@emailshot.io X-EmailShot-Signature: ksSft9PL4wQNXBlfuG-_kgUkBHvuRGu1TVHRPkAiLdm4dSA8pyXaLSIjrllKpV4mJaoFIZYhpl20iS0sZBtzTA== --6b89c945bd4aac366ac0870fa5760c8bb9555f37059c987a784088f280e9 Content-Type: text/plain; charset="utf-8" Content-Transfer-Encoding: quoted-printable View this post on the web at https://www.exponentialview.co/p/would-you-buy= -openai-shares-at-a =E2=80=9CThe level of deep insight into technological trends you share is u= nmatched. No one is doing it like you.=E2=80=9D =E2=80=93 Susan, a paying m= ember I was discussing the OpenAI secondary share sale with a friend. Reputable s= ources say the firm is allowing insiders (early investors and employees) to= sell up to $10.3 billion [ https://substack.com/redirect/27f30349-3028-49e= e-8a2d-7a7117e5da94?j=3DeyJ1IjoiM2dmeXZtIn0.xu76uFObqArDfP822j-jnN48_jCfgM3= m0rbAsF0l24U ] of stock at a $500 billion valuation. Apart from being great= news for San Francisco realtors, it gives outsiders a chance to get a slic= e of this epochal company.=20 Discussing this with my buddy, he asked me a question over WhatsApp: This isn=E2=80=99t a question about whether OpenAI is good or even a great = company. It isn=E2=80=99t a question about whether it will become profitabl= e. It isn=E2=80=99t even a question about whether it has peaked or not. Or = whether the firm has great prospects over the coming years.=20 The subtext of the question is this:=20 Given all the other places you could put your money, would you choose OpenA= I? Will its return be better than buying the Nasdaq?=20 Let=E2=80=99s work through this systematically. The Nasdaq has delivered ro= ughly 13% annual returns over the past decade, albeit with considerable vol= atility. For OpenAI to justify its valuation premium, it needs to outperfor= m this benchmark substantially.=20 My gut reaction was =E2=80=9Cno way=E2=80=9D. I did the mental math of the = Nasdaq return and just felt that OpenAI could never compound faster than th= at.=20 But nothing beats pencil, paper and Excel and when I sat down with my simpl= istic OpenAI model and ran some scenarios, a different picture started to e= merge.=20 Today, I=E2=80=99m going to lay out some of that thinking here.=20 The bull case math At $500 billion, OpenAI is, today, worth roughly the same as Netflix. The s= treamer delivered $39 billion in revenues last year and profits before tax = of nearly $10 billion. That is approximately ten times the sales of OpenAI = in 2024. The AI company was, of course, deep in the red that year, losing a= bout $5 billion.=20 For buyers of OpenAI=E2=80=99s stock today to match Nasdaq=E2=80=99s 13% an= nual return over five years, OpenAI would need to reach a $900 billion valu= ation.=20 But that wouldn=E2=80=99t be a good deal.=20 OpenAI is a privately held company with a complex shareholding structure an= d governance relationship. It also has a commercial deal with Microsoft whi= ch provides cloud infrastructure, access to Azure=E2=80=99s distribution ch= annels and billions in capital support. This all in exchange for exclusive = licensing of specific technologies and 20% of OpenAI=E2=80=99s revenue [ ht= tps://substack.com/redirect/850b7354-66b8-4a72-9b80-1412fb6e251d?j=3DeyJ1Ij= oiM2dmeXZtIn0.xu76uFObqArDfP822j-jnN48_jCfgM3m0rbAsF0l24U ] through 2030, u= p to a cap of $120 billion total return. =20 As a private company, it doesn=E2=80=99t face the same financial and govern= ance scrutiny as a public firm. In practice, private shares with complex in= formation rights and restricted transfer often warrant a material liquidity= and governance discount. Your hurdle rate should reflect that, perhaps dem= anding another 10-12% for those idiosyncratic risks. All of that means you=E2=80=99d need to demand a risk premium =E2=80=93 and= seek a return better than that of the Nasdaq.=20 In any case, while Nasdaq=E2=80=99s returns over the last decade have avera= ged 13% per annum, its three-year return has been closer to an exuberant 23= %. Now, I don=E2=80=99t think that can be sustained. But over fifteen years= , the Nasdaq has returned about 17% which seems like a decent place to star= t.=20 Applying different risk premia to that 17%, an investor taking a position i= n OpenAI might ask for a 20% or 25% annual return, with real implications o= n the firm=E2=80=99s five-year valuation =E2=80=93 perhaps as high as $1.5 = trillion.=20 At $1.5 trillion, OpenAI would sit somewhere between Tesla ($1.08 trillion)= , Broadcom ($1.42 trillion) and Meta ($1.85 trillion). Is this plausible? .= =2E. Unsubscribe https://substack.com/redirect/2/eyJlIjoiaHR0cHM6Ly93d3cuZXhwb25= lbnRpYWx2aWV3LmNvL2FjdGlvbi9kaXNhYmxlX2VtYWlsP3Rva2VuPWV5SjFjMlZ5WDJsa0lqb3= lNRGt3TVRjME1qWXNJbkJ2YzNSZmFXUWlPakUzTWpjMU56UTBOQ3dpYVdGMElqb3hOelUzTVRVe= E9EUTNMQ0psZUhBaU9qRTNPRGcyT0RjNE5EY3NJbWx6Y3lJNkluQjFZaTB5TWpVeUlpd2ljM1Zp= SWpvaVpHbHpZV0pzWlY5bGJXRnBiQ0o5LkZIeWRoT1NVRWQtQzVBME9zX0NfREJPZEdyTDJfQUF= 3LTYtTFNWc0VMX3MiLCJwIjoxNzI3NTc0NDQsInMiOjIyNTIsImYiOnRydWUsInUiOjIwOTAxNz= QyNiwiaWF0IjoxNzU3MTUxODQ3LCJleHAiOjIwNzI3Mjc4NDcsImlzcyI6InB1Yi0wIiwic3ViI= joibGluay1yZWRpcmVjdCJ9.NmkUxT_00kBiLnusNL5Ulb0s938-p_L6r89RLDsmnqc? --6b89c945bd4aac366ac0870fa5760c8bb9555f37059c987a784088f280e9 Content-Type: text/html; charset="utf-8" Content-Transfer-Encoding: quoted-printable 💸 What $500bn bu= ys you in AI (and what it doesn’t)3D""
The bull, the bear and the disruption premium
͏     = ­͏     ­͏     ­͏  =   ­͏     ­͏     ­T= 7;     ­͏     ­͏     &= #173;͏     ­͏     ­͏   =   ­͏     ­͏     ­͏= ;     ­͏     ­͏     &#= 173;͏     ­͏     ­͏   &= #8199; ­͏     ­͏     ­͏=     ­͏     ­͏     = 73;͏     ­͏     ­͏   &#= 8199; ­͏     ­͏     ­͏ =     ­͏     ­͏     = 3;͏     ­͏     ­͏   = 199; ­͏     ­͏     ­͏ &= nbsp;   ­͏     ­͏     ­= ;͏     ­͏     ­͏   Q= 99; ­͏     ­͏     ­͏ &n= bsp;   ­͏     ­͏     ­= ͏     ­͏     ­͏   ̳= 9; ­͏     ­͏     ­͏ &nb= sp;   ­͏     ­͏     ­&= #847;     ­͏     ­͏    = ; ­͏     ­͏     ­͏ &nbs= p;   ­͏     ­͏     ­&#= 847;     ­͏     ­͏    = ­͏     ­͏     ­͏  = ;   ­͏     ­͏     ­= 47;     ­͏     ­͏     = ­͏     ­͏     ­͏  =   ­͏     ­͏     ­T= 7;     ­͏     ­͏     &= #173;͏     ­͏     ­͏   =   ­͏     ­͏     ­͏= ;     ­͏     ­͏     &#= 173;͏     ­͏     ­͏   &= #8199; ­͏     ­͏     ­͏=     ­͏     ­͏     = 73;͏     ­͏     ­͏   &#= 8199; ­͏     ­͏     ­͏ =     ­͏     ­͏     = 3;͏     ­͏     ­͏   = 199; ­͏     ­͏     ­͏ &= nbsp;   ­͏     ­͏     ­= ;͏     ­͏     ­͏   Q= 99; ­͏     ­͏     ­͏ &n= bsp;   ­͏     ­͏     ­= ͏     ­͏     ­͏   ̳= 9; ­͏     ­͏     ­͏ &nb= sp;   ­͏     ­͏     ­&= #847;     ­͏     ­͏    = ; ­͏     ­͏     ­͏ &nbs= p;   ­͏     ­͏     ­&#= 847;     ­͏     ­͏    = ­͏     ­͏     ­͏  = ;   ­͏     ­͏     ­= 47;     ­͏     ­͏     = ­͏     ­͏     ­͏  =   ­͏     ­͏     ­T= 7;     ­͏     ­͏     &= #173;͏     ­͏     ­͏   =   ­͏     ­͏     ­͏= ;     ­͏     ­͏     &#= 173;͏     ­͏     ­͏   &= #8199; ­͏     ­͏     ­͏=     ­͏     ­͏     = 73;͏     ­͏     ­͏   &#= 8199; ­͏     ­͏     ­͏ =     ­͏     ­͏     = 3;͏     ­͏     ­͏   = 199; ­͏     ­͏     ­͏ &= nbsp;   ­͏     ­͏     ­= ;͏     ­͏     ­͏   Q= 99; ­͏     ­͏     ­͏ &n= bsp;   ­͏     ­͏     ­= ͏     ­
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€= 184; What $500bn buys you in AI (and what it doesn’t)

The bull, t= he bear and the disruption premium

=
Azeem Azhar<= /div>
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“The level of deep insight into tech= nological trends you share is unmatched. No one is doing it like you.”= ; – Susan, a paying member

Upgrade to paid
I was discussing the OpenAI secondary share sale= with a friend. Reputable sources say the firm is allowing insiders (early = investors and employees) to sell up to $10.3 billion of stock at a $500 billion= valuation. Apart from being great news for San Francisco realtors, it give= s outsiders a chance to get a slice of this epochal company.¹

Discussing this with my buddy, he asked me a question over WhatsApp:

This isn’t a question about whether OpenAI is = good or even a great company. It isn’t a question about whether it wi= ll become profitable. It isn’t even a question about whether it has p= eaked or not. Or whether the firm has great prospects over the coming years= =2E

The subtext of the question is this:

Given all the other places you could put your money,= would you choose OpenAI? Will its return be better than buying the Nasdaq?=

Let’s work through this systematically= =2E The Nasdaq has delivered roughly 13= % annual returns over the past decade,= albeit with considerable volatility. For OpenAI to justify its valuation p= remium, it needs to outperform this benchmark substantially.

My gut reaction was “no way”. I did the mental math of the= Nasdaq return and just felt that OpenAI could never compound faster than t= hat.

But nothing beats pencil, paper and Excel and when I = sat down with my simplistic OpenAI model and ran some scenarios, a differen= t picture started to emerge.

Today, I’m going to lay= out some of that thinking here.

The bull case m= ath

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On Tesla-like multiples, the company might reac= h $2.5 trillion.

At $500 billion, = OpenAI is, today, worth roughly the same as Netflix. The streamer delivered= $39 billion in revenues last year and profits before tax of nearly $10 bil= lion. That is approximately ten times the sales of OpenAI in 2024. The AI c= ompany was, of course, deep in the red that year, losing about $5 billion. =

For buyers of OpenAI’s stock today to match Nasdaq&#= 8217;s 13% annual return over five years, OpenAI would need to reach a $900= billion valuation.

But that wouldn’t be a good deal= =2E

OpenAI is a privately held company with a complex = shareholding structure and governance relationship. It also has a commercia= l deal with Microsoft which provides cloud infrastructure, access to Azure&= #8217;s distribution channels and billions in capital support. This all in = exchange for exclusive licensing of specific technologies and 20% of OpenAI= ’s reven= ue through 2030, up to a cap of $120 billion total return.

As a private company, it doesn’t face the same fin= ancial and governance scrutiny as a public firm. In practice, private share= s with complex information rights and restricted transfer often warrant a m= aterial liquidity and governance discount. Your hurdle rate should reflect = that, perhaps demanding another 10-12% for those idiosyncratic risks.

All of that means you’d need to demand a risk premium R= 11; and seek a return better than that of the Nasdaq.

In a= ny case, while Nasdaq’s returns over the last decade have averaged 13= % per annum, its three-year return has been closer to an exuberant 23%. Now= , I don’t think that can be sustained. But over fifteen years, the Na= sdaq has returned about 17% which seems like a decent place to start.

<= p style=3D"margin: 0 0 20px 0;color: rgb(54,55,55);line-height: 26px;font-s= ize: 16px;">Applying different risk premia to that 17%, an investor taking = a position in OpenAI might ask for a 20% or 25% annual return, with real im= plications on the firm’s five-year valuation – perhaps as high = as $1.5 trillion.

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At $1.5 trillion, OpenAI would sit somewhere between Tesl= a ($1.08 trillion), Broadcom ($1.42 trillion) and Meta ($1.85 trillion). Is= this plausible? ...

Subscri= be to Exponential View to unlock the rest.

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