OpenAI Nearly Doubles Valuation to $157 Billion

OpenAI was last valued at $86 billion early this year, when employees sold existing shares.

The funding round is one of the largest ever for a private company, save for the $10 billion OpenAI itself raised from Microsoft MSFT -0.85%decrease; red down pointing triangle in January 2023. Earlier this year, Elon Musk’s AI startup xAI raised $6 billion.

Investors in the new round will have the right to withdraw their money if OpenAI doesn’t complete its planned conversion to a for-profit company within two years. Currently it is a charitable nonprofit with a for-profit division through which investors can buy a share of its future profit.

The round was led by venture-capital firm Thrive Capital, which is putting $1.25 billion into the company, according to people familiar with the matter. Microsoft is investing a little less than $1 billion.

New investors include Tokyo-based conglomerate SoftBank, which is putting in around $500 million, and AI chip maker Nvidia, which is investing about $100 million, one of the people familiar with the matter said.

Investment firm Tiger Global Management is putting in $350 million. Cathie Wood’s Ark Investment Management and Altimeter Capital are each putting in about $250 million, which is the minimum amount required to review OpenAI’s financial documents.

Other investors include Khosla Ventures, Fidelity Management and Research Company and MGX, a United Arab Emirates stApple was in talks to invest in OpenAI, but those discussions fell apart, The Wall Street Journal previously reported. It would have been a rare strategic investment for the iPhone maker, which is already joining with OpenAI on its new Apple Intelligence product.

OpenAI told investors in the new round that it doesn’t want them to put money into its biggest private competitors. Those include Anthropic, which was founded by several ex-OpenAI employees; Safe Superintelligence, which was co-founded by OpenAI’s former chief scientist Ilya Sutskever; and xAI. Before starting xAI, Musk was an OpenAI cofounder and its first major source of funding.

In addition to those startups, OpenAI is also up against tech giants such as Google and Meta Platforms that are making huge investments in AI.

OpenAI remains the best known company in the burgeoning AI market, thanks to the breakout success of ChatGPT, which has 250 million weekly active users and 11 million paying subscribers, according to a knowledgeable person. Around one million business customers pay to use its technology.

But the company is far from profitable, which made the new investment round critical. It is expected to lose around $5 billion this year on revenue of $3.7 billion, a person with knowledge of its financial data confirmed. It is projecting revenue will grow to $11.6 billion in 2025.

Developing new AI models is hugely expensive, as is operating them. In addition, competition for the most talented AI researchers has driven their annual salaries into the millions.

The New York Times reported earlier on OpenAI’s financial data.

OpenAI has been putting out new products for consumers and businesses at a rapid pace this year. It has also been adding people with business experience to an employee base that used to be made up primarily of researchers. The company recently hired its first chief financial officer, Sarah Friar, who helped lead the fundraising process.

This shift—along with personal disputes among OpenAI executives—has sparked tensions within the company. Numerous top executives and researchers have left this year, including multiple co-founders and, just last week, Chief Technology Officer Mira Murati.

At an AI conference in Seattle Wednesday, Altimeter chief executive Brad Gerstner said he was impressed ChatGPT has become “the verb” associated with using AI and he wasn’t put off by the drama that has taken place at OpenAI recently.

“Look in the middle of all this chaos of the last nine months at OpenAI,” he said. “And what’s happened? The numbers have accelerated. They’re launching new products… That’s not a sign of fragility.”