September 2025
Artificial Intelligence (“AI”) is a term coined in 1955 by John McCarthy, Stanford’s first faculty member in AI, who defined it as “the science and engineering of making intelligent machines.” According to Stanford University, autonomous systems can independently plan and decide sequences of steps to achieve a specific goal. Machine learning is a part of AI that studies how computer systems can improve their perception, knowledge, decisions or actions based on experience or data.
While AI is not yet an industry accepted tool in the world of business valuations, it offers the prospect of enhanced accuracy in valuing businesses by utilizing real-time market data, predictive analytics and intensive financial modeling. AI will be most valuable with respect to valuations of publicly-traded stock with current as-of dates due to its rapid analysis of large amounts of current financial data. AI will pull economic and industry outlooks from numerous sources in quickly developing its summaries. One advantage of AI is that it isn’t biased in creating its summaries and conclusions as they are based only on all available data rather than a relatively few resources. AI doesn’t have the potential for conscious or subconscious bias that exists by a human valuator.
AI can potentially analyze numerous comparable companies compared to the relatively few that valuators now analyze. These deep analyses can readily be updated quickly and accurately detect trends that can be useful in valuing businesses. AI also will have the ability to more accurately predict the future performance of a company due to its access to large amounts of historical data.
Despite the potential of AI in enhancing business valuations, AI is not a panacea. AI output is only as good as the data it analyzes (garbage in garbage out) and it can’t analyze subjective data such as the mindset of a board of directors. AI can help businesses to be accurately valued, but it will never eliminate the need for human judgment.
In order to utilize AI, business valuators will need access to relevant databases. The availability and cost to access relevant databases is unknown.
All in all, AI is expected to be a valuable tool that will enhance the accuracy of business valuations, but it won’t eliminate professional human judgment. The availability of relevant databases and their cost is unknown.
Relevant Court Cases
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Medtronic, Inc. & Consolidated Subsidiaries v.
Commissioner of Internal Revenue,
The U.S. Court of Appeals, Eighth Circuit,
No. 23-3063,
filed September 3, 2025
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Rover Pipeline, L.L.C. v. Harris,
Ohio Supreme Court,
2025 Ohio 2806,
dated August 13, 2025
Recent Business Valuation Articles
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“Is Generative AI Old Wine in
a New Bottle? An Asset
Pricing Model on Generative AI
and Data Economy,”
by Haoyang Sun and Cong Zhang,
dated March, 2025
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“The Option Value of Waiting: Market
Valuation of AI Investments under Uncertainty,”
by Weiyi Yue and Xianghong Zhou,
posted April 28, 2025
Recent Engagements
- Valuation of shares of the common
stock of a mostly real estate
holding company on a minority
interest basis for estate tax
reporting purposes.
- Valuation of a limited partnership
interest of an investment holding
company on a minority interest
basis for gift tax reporting purposes.
- Valuation of 100% of
the common stock of a niche
residential contracting firm
on a controlling interest
basis for purposes of
calculating the net unrealized
built-in gain as of the
date of conversion from C
corporation to S corporation.
- Consulting regarding 100% of
the equity of a specialty engineering
firm on a controlling interest basis
for purchase/sale purposes.
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