Investor Appetite for Pre-IPO AI Firms Is Pushing Valuations Sky-High

Investor appetite for companies linked to AI is high—and not just for their stocks. Valuations for America’s hottest private artificial intelligence startups are soaring as investors clamor for exposure ahead of possible market debuts.

Among the latest examples: Reports this week said ChatGPT maker OpenAI boosted the size of a secondary share sale that could lift its valuation to $500 billion. That’s up from $300 billion earlier this year and would make OpenAI the most valuable venture capital-backed startup ever. OpenAI didn’t respond to Investopedia’s request for comment in time for publication.

Also this week, Claude maker Anthropic said its latest fundraising round lifted its valuation to $183 billion, nearly tripling its level in March. 

And Elon Musk’s xAI, which brought the world ChatGPT rival Grok, is reportedly in talks with investors about plans to raise funds that could bring its valuation to $200 billion from an estimated $113 billion in March.

Big Pre-IPO Valuations Point to Open-Market Optimism

Some fresh listings related to AI have performed well lately, suggesting a healthy appetite for new AI plays.

CoreWeave (CRWV), a cloud computing company backed by chipmaker Nvidia (NVDA), has more than doubled from its initial public offering price since going public in March. Nvidia supplier Astera Labs (ALAB), which offers semiconductor-based connectivity solutions for AI infrastructure, is up more than 400% from its debut last year.

Because private startups like OpenAI aren’t publicly traded yet, it’s difficult to speculate what their market value could be after an IPO or how additional details about their businesses made public during the registration process could affect demand for the shares. Still, the growth of recent private AI valuations offers another strong signal of demand for AI-linked shares, a force that could mint a new cohort of market heavyweights.

If OpenAI were to obtain a market capitalization close to its private valuation of $500 billion, that would make it the 20th most valuable public company in the world, just behind Mastercard (MA) and Netflix’s (NFLX).

A market value near or around $200 billion would make Anthropic and xAI more valuable than major financial firms like Citi (C), Charles Schwab (SCHW), and BlackRock (BLK).

There Are Ways to Invest in Pre-IPO AI Companies, But There May Be Hurdles

If you want to invest in these companies, but aren’t eligible for employee stock options or other direct ownership criteria required to buy them directly from the company, there are other ways to gain exposure.

You may be able to trade with existing shareholders like employees or other early investors on third-party platforms like EquityZen, Hiive, or Forge, which facilitate buying and selling shares of pre-IPO companies. However, you’d need to qualify as an “accredited investor” per the Securities and Exchange Commission’s definition, which comes with specific financial or professional requirements.

Another option would be private-market funds, which typically have investment minimums and are also often limited to accredited investors, but may be more accessible with a growing number of offerings with lower barriers to entry from financial firms looking to capitalize on demand for broader access to private equity.

And Robinhood recently launched “tokenized” stakes of OpenAI and SpaceX to users in Europe, with plans to expand similar offerings to the U.S. OpenAI has distanced itself from the tokenized offerings, however, writing at the time that “these ‘OpenAI tokens’ are not OpenAI equity. We did not partner with Robinhood, were not involved in this, and do not endorse it.”