Why OpenAI’s proposed joint venture matters for TPG (NasdaqGS:TPG)

Reports that OpenAI is in advanced talks with TPG to anchor a proposed US$10b joint venture give investors a fresh corporate event to consider when assessing the stock’s recent share performance.

Despite the OpenAI joint venture talks, TPG’s recent share price performance has been weak, with a 30 day share price return of 9.98% and a year to date share price return of 39.06%. However, the 3 year total shareholder return of 57.09% shows a stronger longer term picture.

If this potential AI partnership has your attention, it could be a good moment to broaden your search with other AI focused opportunities through the 33 AI small caps

With TPG’s 1 year total return down 16.77% but its 3 year total return at 57.09%, plus a reported 15.42% intrinsic discount and a sizeable gap to analyst targets, is there genuine upside here or is the market already pricing in future growth?

Most Popular Narrative: 41.8% Undervalued

With TPG last closing at $40.07 against a most-followed fair value estimate of $68.87, the narrative points to a wide valuation gap that hinges on execution in alternatives and M&A.

Thematic investment focus in high-growth areas (sustainability, digital infrastructure, healthcare, AI) is enabling TPG to capitalize on long-term, secular shifts toward these sectors, driving outperformance in investment returns and supporting growth in carried interest and incentive income, positively impacting earnings.

Want to see what kind of earnings path and margin profile sit behind that fair value? The narrative leans on ambitious profitability targets, rich fee economics, and a future P/E that assumes investors keep paying up for this platform.

Result: Fair Value of $68.87 (UNDERVALUED)

However, this hinges on fundraising staying resilient and acquisition integration going to plan, because weaker flows or messy deals could quickly challenge that undervaluation story.

Another View: What The P/E Ratio Is Saying

The earlier narrative leans on a fair value of $68.87, but the current P/E of 51.9x tells a different story. That multiple is far above the US Capital Markets industry at 27.4x, the peer average of 32.2x, and even the 23.9x fair ratio our model points to.

In plain terms, the share price already reflects a lot of future earnings growth. As a result, any slip against those high expectations could hit sentiment quickly. The question for you is whether the potential rewards justify paying a valuation this stretched.

Next Steps

Mixed messages in the data so far? If you want to move quickly and decide where you stand, weigh up the 4 key rewards and 1 important warning sign.

Looking for more investment ideas?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.