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OpenAI, the artificial intelligence powerhouse, is reportedly gearing up for another major funding round that could push its valuation beyond $100 billion. According to an August 28 report from The Wall Street Journal, insiders revealed that OpenAI stockholders are preparing to sell shares, valuing the company at approximately $103 billion. If new investments are secured, the valuation could climb even higher.
Thrive Capital, a prominent venture capital firm, is expected to invest $1 billion in this upcoming funding round. Additionally, Microsoft, a key player in OpenAI’s journey, is also expected to contribute more capital. This would mark the most significant influx of funds for OpenAI since Microsoft’s $10 billion investment in January 2023. Microsoft currently holds a 49% stake in OpenAI, having invested a total of $13 billion since 2019.
The private documents reviewed by The Wall Street Journal indicate that current OpenAI stockholders have been negotiating to sell their shares at a valuation of $103 billion. Any new investment would likely set the company’s value at this figure or higher, before factoring in fresh capital.
Back in February, OpenAI allowed employees to sell their shares, which led to the company being privately valued at roughly $86 billion at that time.
Despite its rapid growth, OpenAI’s financial stability has raised some concerns. The AI company is reportedly generating around $3.4 billion in annual revenue, which has sparked debates over its long-term profitability. On August 2, tech journalist Ed Zitron expressed doubts about OpenAI’s business model, calling its path to profitability “unsustainable.” He suggested that for OpenAI to survive past 2026, it would need to secure more funding than any startup in history.
Recent reports have also suggested that OpenAI could face losses of up to $5 billion in 2024, potentially depleting its cash reserves within the next year.
It’s worth noting that OpenAI investors don’t own traditional private equity, as OpenAI is technically still a nonprofit. Instead, they invest in OpenAI LP, a for-profit subsidiary, and are entitled to profits once the company reaches a specific cap.
This news comes as competition in the AI sector heats up, with companies like Google and Amazon heavily investing in their own AI ventures, including Gemini and Anthropic. Meta is also in the race with its open-source AI model, Llama 3.1.
