AI is an expensive business: OpenAI intends to attract new billion-dollar investments

The OpenAI company has no intention of reducing its influence in the market for generative artificial intelligence systems, and for this it intends to conduct a new round of fundraising. The company has big appetites – it plans to raise several billion dollars. As The Wall Street Journal notes, the next round of investment should value OpenAI’s capitalization at more than $100 billion.

Image source: OpenAI

According to the source, new financial injections into OpenAI capital will be provided by the venture fund Thrive Capital and Microsoft Corporation, which remains a shareholder of the startup. The first will invest about $1 billion, the amount of investment from Microsoft is not specified. In January 2023, this company invested about $10 billion in OpenAI. The previous stage of evaluating OpenAI’s business occurred at the end of last year, when employees sold its shares to third-party investors. At that time, the company’s capitalization was estimated at $86 billion. If we talk about Thrive Capital, then since last year this fund has already invested several hundred million US dollars in OpenAI capital. It is generally accepted that the fund’s management has a trusting relationship with OpenAI CEO Sam Altman.

Who else will participate in the new round of investment is not specified. Competition in the artificial intelligence segment is growing; many industry giants are either independently developing specialized competencies or investing in sponsored startups. For Microsoft, this is formally OpenAI. According to The Wall Street Journal, some OpenAI shareholders recently negotiated with investors to sell their shares of the company at a price that would correspond to the capitalization level of $103 billion. Accordingly, during the new negotiations, the valuation of the business is unlikely to be lower.

OpenAI will use the funds received from investors for its development. The creation of a large GPT-4 language model required an expenditure of $100 million. Work is already underway on a new model; it will certainly be more expensive to develop. So far, the AI ​​field for most investors involves active expenses, but the financial return is minimal in the short term. OpenAI itself this year reached $3.4 billion in annual revenue.

Since 2019, Microsoft has invested about $13 billion in the capital of the OpenAI subsidiary, which is responsible for the commercial component of the business. This allows the software giant to claim 49% of the profit of this structure. Both companies are considered formal competitors for each other; they do not limit themselves in choosing alternative partners for the development of a wide range of initiatives.