OpenAI cuts funding goal to about $20bn as markets turn cautious

In short: OpenAI has lowered the target for its latest fundraising to about $20bn, down $10bn from what it was aiming for last month.

What happened

OpenAI, the company behind ChatGPT, was recently trying to raise $30bn. It was also pitching a higher company valuation of about $1.4tn, according to the Financial Times.

Now, OpenAI is seeking about $20bn at a $1.25tn valuation, based on comments from multiple people familiar with the deal. A company “valuation” is the price investors agree the company is worth, a bit like setting a price tag before selling shares.

The report says OpenAI set a deadline for investors to commit by Friday. The first part of the round is expected to bring in less than $20bn because some investors reduced how much they planned to put in.

One large expected participant is a group of investment firms from the United Arab Emirates, including state-backed tech fund MGX. As part of the deal, OpenAI would have an option to lease new computing power in the region. Computing power is the heavy-duty computer capacity needed to train and run AI systems, similar to renting more engines when you need a faster factory line.

Other reported participants include Founders Fund, Coatue, Sequoia Capital, Andreessen Horowitz, and SoftBank. The report also mentions a later retail offering for wealthy individuals that could bring the total closer to $20bn.

Why it matters

OpenAI and its rivals need huge amounts of money to pay for the computers that run AI. If big investors pull back, it can affect how quickly these tools improve, how much they cost to use, and which companies lead the market.

Source: Financial Times