The highly anticipated initial public offerings of AI powerhouses OpenAI and Anthropic may encounter significant headwinds, diverging from the speculative fervor driving private market valuations. While investors have bid up their potential market capitalization to approximately $1tn each, public market investors are expected to adopt a more pragmatic approach, scrutinizing their long-term cash-generating abilities. This contrasts with the recent $1.8tn valuation of SpaceX, which benefits from a tangible business in rocket launches and satellites, a defensible moat that pure AI labs lack.

Several factors cast doubt on the sustainability of lofty AI valuations. Firstly, the business models of OpenAI and Anthropic are