OpenAI raises $6.6 billion in funds at $157-billion valuation
OpenAI has completed a deal to raise $6.6 billion in new funding, giving the artificial intelligence company a $157-billion valuation and bolstering its efforts to build the world’s leading generative AI technology.
The funding round was led by Thrive Capital, the venture capital firm headed by Josh Kushner, which put in $1.3 billion. Microsoft Corp., OpenAI’s largest backer, put in about $750 million, on top of the $13 billion it had already invested in the startup, according to a person familiar with the matter. Other investors included Nvidia Corp., the chipmaker whose powerful processors are at the center of the AI boom. Microsoft declined to comment.
The deal is one of the largest-ever private investments, and makes OpenAI one of the three largest venture-backed startups, alongside Elon Musk’s SpaceX and TikTok owner ByteDance Ltd. The size of the investment underscores the tech industry’s belief in the power of AI and its appetite for the extremely costly research powering its advancement.
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Other investors writing major checks included Tiger Global Management, which put in $350 million, and Altimeter Capital, which invested at least $250 million, according to people familiar with the matter who asked not to be identified discussing private information. Global investors participating in the round included SoftBank Group Corp. and the new Abu Dhabi-based tech investment firm MGX.
In a statement, the company said it would use the cash influx to drive forward AI research and increase its computing capacity. “AI is already personalizing learning, accelerating healthcare breakthroughs and driving productivity,” OpenAI Chief Financial Officer Sarah Friar said. “And this is just the start.”
The huge valuation for OpenAI has transfixed Silicon Valley.
“People are shocked at 150 billion bucks,” said Altimeter Chief Executive Brad Gerstner, speaking onstage at a conference in Seattle on Wednesday.
But he also cited reports that the startup expects to generate more than $10 billion in revenue next year, adding that a multiple of 10 times projected revenue is not exorbitant for a company about to go public, giving Google and Facebook as comparable examples.
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Apple Inc. did not participate in the deal, although the company was previously in talks to invest in the round, Bloomberg has reported. The iPhone maker has a partnership with OpenAI to integrate ChatGPT on its devices and through its Siri voice assistant. As part of that partnership, Apple was previously in discussions to get a board observer role at OpenAI, although those plans were dropped, people familiar with the matter told Bloomberg.
The funding round follows a turbulent year for OpenAI. Last November, the company’s board fired and then quickly rehired its CEO, Sam Altman. In the following months, the company has remade its board, hired hundreds of new employees and lost several key leaders, including co-founder Ilya Sutskever and Chief Technology Officer Mira Murati.
At the same time, OpenAI is discussing moving from its unusual nonprofit structure to a for-profit model. The move would appease the company’s backers but could pose legal hurdles. As part of a transition, OpenAI has discussed awarding Altman equity in the company — a stake that could be worth more than $10 billion.
OpenAI kicked off a Silicon Valley obsession with the potential of AI when it debuted its chatbot, ChatGPT, in 2022. The tool can generate human-sounding responses to questions, and has amassed 250 million weekly active users, according to one person. Its paid service, ChatGPT Plus, has 11 million subscribers, the person said.
A slate of new companies have sprung up to compete with OpenAI in recent years, including several that have been founded by former OpenAI employees — such as Anthropic and Safe Superintelligence. OpenAI is also facing intense competition from larger tech companies with vast resources, including Google and Amazon.com Inc., which are developing their own AI models.
Ghaffary, Roof, Metz and Bass write for Bloomberg.
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