Before we get to today’s column, we have to mention Disney and OpenAI’s big partnership announcement this morning. As part of a new three-year licensing agreement, OpenAI’s video app Sora and ChatGPT will be able to generate image and video content that includes characters such as Luke Skywalker, Darth Vader, Mickey Mouse and Iron Man from Disney’s extensive film and TV library. Disney+ users will be able to watch selections of Sora-generated videos on the streaming service. For more, see here.

Disney will also become a customer of OpenAI’s models and ChatGPT product and will make a $1 billion equity investment in the AI firm, with warrants to purchase additional equity. It’s a smart way for OpenAI to address rising questions about the use of unauthorized copyrighted characters on Sora.

Onto today’s column…

It’s no secret that valuations of AI startups have reached the stratosphere. What is interesting, though, is that the average valuation—compared to revenue—for major startups has fallen this year. That’s particularly the case for the largest AI model makers.

For instance, the average valuation of the two largest AI model developers, OpenAI and Anthropic, has dropped to 36 times annualized revenue from 51 in February, the last time we did this exercise. That’s a steeper drop than for AI apps, on average. The multiple for those companies has fallen to around 53 times from 65 in February.