Where AI Valuations Are Cheap

Some recent fundraisings, including for video generator Synthesia, have suggested valuations for AI startups are coming down to earth. But at 30 times next year’s revenue, you wouldn’t exactly call these deals cheap. You could, however, use that description for the startups that provide computing resources to AI developers.

Take Lambda, a 12-year-old startup that rents out Nvidia chips to AI developers via its cloud service and on-premise servers. It has told investors it expects to generate $400 million in revenue this year, according to a person familiar with the deal discussions. That’s decent growth on the $250 million Lambda had expected to generate in 2023 but not as good as the $600 million it originally projected for this year. 

That lower-than-projected revenue growth may be why the San Jose-based company has discussed raising $600 million at a $2 billion pre-money valuation. The new valuation would reflect a roughly five-times multiple 2024 revenue, roughly at the level of chipmaker Qualcomm and semiconductor equipment company Applied Materials, both of which are growing at single digit percentage levels. (On the other hand, Lambda’s 2023 funding of $300 million was also done at a five times multiple.)