AI-related firms preparing for stock market listings are seeking very high prices for their shares, despite many having limited current revenue. This trend is a striking contrast between ambition and income, raising questions for investors. While investors are accustomed to companies losing money, they typically still have meaningful sales. The Financial Times highlights that a small number of listed U.S. companies are expected to generate no revenue at all in the coming year, with even fewer in Europe.
This phenomenon is particularly evident in the AI sector. The Financial Times points to two data center builders, SB Energy and Nscale, which are preparing for initial public offerings in New York. Both companies reportedly generated approximately $140 million in revenue in the last half-year, yet they are aiming for valuations of around $50 billion and $35 billion, respectively. This is likened to valuing a new restaurant as a 500-location chain before its first location has established a steady customer base.
To reassure investors, these companies have secured contracts with major AI firms such as OpenAI, Anthropic, and ByteDance. These deals are intended to create a "backlog" of future work and anticipated payments. However, the Financial Times notes that risks remain, particularly if these data centers are not constructed on time or within budget. Public market investors have previously faced setbacks with very early-stage companies, including many that went public through SPAC deals, and the true test for AI IPOs will come if investor appetite for risk begins to cool.
