Kalshi's valuation is a bold prediction
1. Key Themes
Theme: China's AI champions are scaling toward public markets
AI now dominates Greater China venture capital
AI is absorbing a disproportionate share of regional VC capital, and the leading model developers are raising at very large valuations.
"So far in 2026, investments in AI companies have accounted for half of all VC deal value in Greater China, according to our 2026 Greater China Private Capital Breakdown."
Moonshot AI and DeepSeek are lining up IPOs
Both companies are reportedly heading to listings after mega-rounds, suggesting a liquidity window for Chinese AI.
"Two of China's biggest AI startups may IPO next year, Bloomberg reported, as Moonshot AI and DeepSeek have each raised massive amounts of capital—the former at a $50 billion valuation." "China-based AI model developer Moonshot AI raised its latest round at a $50 billion valuation and is preparing for an early 2027 Hong Kong IPO, Bloomberg reported." "China-based AI startup DeepSeek is raising 80 billion yuan ($12 billion) in a new round from investors including Tencent, Bloomberg reported."
Adjacent Chinese AI IPOs are queuing up
Kling AI, backed by Kuaishou, is also heading to Hong Kong, reinforcing the pipeline.
"Kuaishou Technology-backed AI video company Kling AI picked banks for its Hong Kong IPO, which is expected to raise at least $1 billion, Bloomberg reported."
Theme: Prediction markets are priced for a best-case outcome
Kalshi's valuation is approaching the bull case
At $40B, investors are paying for a scenario PitchBook considers demanding.
"Prediction-market exchange Kalshi is reportedly seeking to raise $1 billion at a $40 billion valuation, approaching the bull-case scenario highlighted in our recent initiation report, even as legal challenges mount."
The base case already assumes extraordinary growth
"Our $30.4 billion base case for 2028 already assumes a near-150% three-year revenue CAGR, a 50%+ EBITDA margin, and a 75th-percentile EV/EBITDA peer multiple to reach that level." "The $42.1 billion bull case is more aggressive, assuming 20% higher earnings and a 90th-percentile EV/EBITDA multiple."
Revenue concentration in sports creates regulatory risk
"The legal contests are aimed squarely at the business that, according to our estimates, has generated 80% of Kalshi's YTD revenue. Restrictions could reduce activity and increase compliance costs, putting pressure on earnings and the premium investors assign to them."
Theme: LP due diligence should weight qualitative signals from GPs
GP language beats GP valuations as a predictor
New research suggests the narrative in GP reporting carries more information than the marks.
"New research suggests that LPs might benefit from placing the qualitative above the quantitative." "How GPs described their portfolio companies tended to be a better predictor of performance than their valuations within the first three years of an investment, the paper found."
Which topics signal future performance
"A focus on cash flow and business models was associated with significantly better performance at exit, while communication about capital structure pointed to a worse outcome."
Theme: Capital is flowing into AI-adjacent infrastructure, security, and defense
Large rounds in AI-enabled engineering, security, and defense
"Vinci, the developer of an AI physics-simulation platform for hardware and chip engineering, raised a $250 million Series B led by Advent, Temasek and Xora at a $1.5 billion valuation." "Hadrian, an Amsterdam-based operator of an agentic AI offensive security platform, secured $40 million in a round led by Forgepoint Capital International and SmartFin." "Defense tech startup Aventra Defense Systems raised a $17.5 million round led by Konvoy."
Energy infrastructure fundraising and M&A remain strong
"Energy infrastructure-focused investor LS Power closed on $6 billion for its sixth fund." "Energy Transfer agreed to acquire Yorktown Partners- and Keeneland Capital-backed natural gas pipeline operator Vaquero Midstream in a $2.63 billion deal." "Fusion energy startup Type One Energy secured a $200 million Series B led by Breakthrough Energy Ventures and Clutterbuck Capital."
2. Contrarian Perspectives
Cheaper AI models may not be cheaper
Conventional wisdom is that lower per-token prices mean lower costs, but weaker models can consume more tokens to reach the same result.
"'Price alone should not be used to infer which model is actually cheaper.' Cheaper AI might be worse at reasoning and judgment than big-name models, leading businesses to use up more tokens on the same tasks."
PE is not purely numbers-driven, and LPs should read the words, not the marks
The "PE = numbers, VC = narrative" framing is questioned, and GP narrative turns out to be a better predictor than quantitative valuation.
"A common, if oversimplified, view is that PE funds invest based on numbers, VC funds based on narrative." "The most powerful predictor of poorer returns was negative macroeconomic commentary." Lerner explains why: "People don't want to say, 'We made a mistake and chose to back the wrong entrepreneur.' It's perhaps a little more convenient to say, 'Let's just blame it on the macro economy.'"
Kalshi's $40B price implicitly ignores a downside regulatory scenario
Investors appear willing to look past legal risk, while PitchBook's own forecast excludes it.
"This price suggests prospective backers are still willing to look past uncertainty around its sports business, but we believe many things need to go Kalshi's way." "Notably, this forecast does not account for a significant regulatory change that would impair its ability to serve sports markets."
3. Companies Identified
- Description: Prediction-market exchange.
- Why mentioned: Seeking $1B at a $40B valuation; the article questions whether that is ahead of fundamentals.
- Quotes: "Prediction-market exchange Kalshi is reportedly seeking to raise $1 billion at a $40 billion valuation, approaching the bull-case scenario highlighted in our recent initiation report."
- Description: China-based AI model developer.
- Why mentioned: $50B valuation and an early 2027 Hong Kong IPO.
- Quotes: "Moonshot AI raised its latest round at a $50 billion valuation and is preparing for an early 2027 Hong Kong IPO, Bloomberg reported."
- Description: China-based AI startup.
- Why mentioned: Raising $12B with Tencent participating; potential IPO.
- Quotes: "DeepSeek is raising 80 billion yuan ($12 billion) in a new round from investors including Tencent."
Kling AI
- Description: Kuaishou-backed AI video company.
- Why mentioned: Chose banks for a Hong Kong IPO raising at least $1B.
- Quotes: "Kling AI picked banks for its Hong Kong IPO, which is expected to raise at least $1 billion."
- Description: Crypto exchange operator.
- Why mentioned: Raised at a $25B valuation from Circle, Qube Research & Technologies and Ripple.
- Quotes: "OKX, the operator of a crypto exchange, received an investment from investors including Circle, Qube Research & Technologies and Ripple at a $25 billion valuation."
- Description: AI physics-simulation platform for hardware and chip engineering.
- Why mentioned: $250M Series B at $1.5B valuation.
- Quotes: "Vinci... raised a $250 million Series B led by Advent, Temasek and Xora at a $1.5 billion valuation."
Type One Energy
- Description: Fusion energy startup.
- Why mentioned: $200M Series B.
- Quotes: "Type One Energy secured a $200 million Series B led by Breakthrough Energy Ventures and Clutterbuck Capital."
Capitolis
- Description: Fintech platform for institutional investors and banks.
- Why mentioned: $120M Series E led by Citi at $1.9B.
- Quotes: "Capitolis... raised a $120 million Series E led by Citi at a $1.9 billion valuation."
Spiko
- Description: Paris-based tokenized cash fund platform.
- Why mentioned: $90M Series B led by NEA.
- Quotes: "Spiko, a Paris-based developer of a tokenized cash fund platform, raised a $90 million Series B led by New Enterprise Associates."
Multiply Labs
- Description: Robots for drug manufacturing.
- Why mentioned: $75M Series B led by NantWorks.
- Quotes: "Multiply Labs, a startup building robots for drug manufacturing, raised a $75 million Series B led by NantWorks."
Hadrian
- Description: Agentic AI offensive security platform.
- Why mentioned: $40M round.
- Quotes: "Hadrian, an Amsterdam-based operator of an agentic AI offensive security platform, secured $40 million."
Sensible Biotechnologies
- Description: mRNA technology platform developer.
- Why mentioned: $47M including up to $20M of government and EU funding, plus In-Q-Tel participation.
- Quotes: "received $47 million, which includes a Series A from investors including OTB Ventures, In-Q-Tel and Recode Ventures and up to $20 million in funding from the Slovakian government and the European Union."
Arboretum LifeSciences
- Description: Clinical-trial patient identification with health systems.
- Why mentioned: Launched with $30M Series A from Amgen, F-Prime, GV.
- Quotes: "launched with a $30 million Series A from investors including Amgen, F-Prime and GV."
Other notable venture rounds
- KymaThera ($80M Series B, Alta Partners), RougeTx ($58M Series A), Flai ($27M Series A, Base10), Procuros (€20M Series A, XAnge), Finmid (€17M extension), Aventra Defense Systems ($17.5M, Konvoy), Siena ($17M Series A), Avarra ($17M Series A), Santé ($15M Series A).
- Quotes: "Biotech startup KymaThera... raised an $80 million Series B led by Alta Partners." / "Flai, the developer of car dealership operations software, raised a $27 million Series A led by Base10 Partners."
Exits and M&A
- WHI Holdings: "Bain Capital and Singapore sovereign wealth fund GIC are considering a sale or IPO of WHI Holdings, a Japan-based HR software company, at a targeted valuation of at least 500 billion yen ($3.2 billion)."
- Vaquero Midstream: acquired by Energy Transfer for $2.63B.
- Clarion: "Informa is buying London-based events organizer Clarion from Blackstone for £2.24 billion."
- EzCater: "a TPG-backed catering company for corporate clients, agreed to be acquired by Uber in a $2.3 billion deal."
- Riverside Natural Foods: "Prelude Growth Partners agreed to exit its minority stake in Riverside Natural Foods, which owns the granola snacks brand MadeGood and is valued at $1 billion."
- MNT-Halan: "planning a Cairo IPO to raise about $150 million."
- ASP Data Center: "considering an Oslo IPO that could raise $100 million."
- TechWolf: "which is backed by Felix Capital, agreed to be acquired by SAP."
Fund managers
- Forbion: "raised €2.3 billion across two funds: Forbion Growth Opportunities Fund IV and Forbion Ventures Fund VIII."
- Collective Global: "seeking to raise $1 billion for its second GP-stakes fund."
- Endeavor Catalyst: "closed on $320 million for its fifth VC fund."
- RedBird Capital Partners: "invested $4 billion in equity to fund Paramount Skydance's Warner Bros. Discovery acquisition, which closed Tuesday."
4. People Identified
Josh Lerner
- Description: Professor at Harvard Business School and co-author of the GP-language study.
- Why mentioned: Explains why GPs lean on macro explanations when investments underperform.
- Quotes: "'People don't want to say, "We made a mistake and chose to back the wrong entrepreneur." It's perhaps a little more convenient to say, "Let's just blame it on the macro economy,"' said Josh Lerner."
Franco Granda
- Description: Senior Research Analyst, Private Company Coverage, PitchBook.
- Why mentioned: Author of the Kalshi valuation analysis.
- Quotes: "This price suggests prospective backers are still willing to look past uncertainty around its sports business, but we believe many things need to go Kalshi's way."
Jessica Hamlin
- Description: Senior Funds Columnist, PitchBook.
- Why mentioned: Author of the piece on LPs and GP language.
- Quotes: "New research suggests that LPs might benefit from placing the qualitative above the quantitative."
5. Operating Insights
Evaluate AI vendors on cost per completed task, not price per token
Cheaper models can burn more tokens on the same work.
"Cheaper AI might be worse at reasoning and judgment than big-name models, leading businesses to use up more tokens on the same tasks."
Diversify revenue before a regulator forces you to
Kalshi's exposure shows the risk of a single regulated line dominating revenue. Operators in regulated markets should track concentration and compliance cost as valuation drivers.
"The legal contests are aimed squarely at the business that, according to our estimates, has generated 80% of Kalshi's YTD revenue."
Communicate with LPs around fundamentals, not macro
Fundraisers can build credibility by emphasizing cash flow and business models in reporting. The research indicates blaming macro conditions is read as a negative signal.
"A focus on cash flow and business models was associated with significantly better performance at exit, while communication about capital structure pointed to a worse outcome."
6. Overlooked Insights
VC has overtaken PE as the top ESG strategy in PitchBook's survey
This is a first for the survey, though partly a sample-composition effect.
"Venture capital has overtaken private equity as the top strategy for ESG in this year's Sustainable Investment Survey, a first in the questionnaire's history. The shift largely reflects the higher representation of VC investors in 2026—62% of GP and funds-of-funds respondents offer VC strategies, up from 53% in 2025."
Travel is displacing homeownership for Gen Z
A consumer behavior shift with implications for housing, travel, and fintech products.
"Traveling is one of the luxuries Gen Z wants to protect the most. Something has to give if travel is getting more expensive. For young people, that thing is owning a home."