The new funding round, which will see OpenAI raise more than $6 billion, shows investors’ faith that developer ChatGPT will become the world’s leading artificial intelligence company. The company was so interesting to investors that there were too many of them for the next round of financing, and OpenAI was able to afford to choose who to take money from.
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Investors in OpenAI’s latest funding round, which will raise more than $6 billion, are making an unprecedented bet that it will become the world’s leading AI developer and be valued in the trillions of dollars. OpenAI’s fundraising ends at a valuation of $150 billion. Venture capital company Thrive Capital has invested at least $1 billion in the developer in recent weeks; OpenAI expects to raise an additional $5 billion. Apple, Nvidia and Microsoft, the most valuable technology companies in the world, are negotiating to join the funding round. New York-based Tiger Global and the MGX fund, supported by the authorities of the United Arab Emirates, have shown interest in investments. The deal will be closed in the near future, reports the Financial Times.
Leading Silicon Valley tech investors, including Andreessen Horowitz and Sequoia Capital, are not participating in the round. The deal was unusual for current participants: Thrive and Tiger typically invest more modestly in lesser-known startups and hope to receive 10 to 100 times that investment. To achieve this kind of return from OpenAI, it would have to grow to a value of $1.5 trillion – more than Meta✴ and Warren Buffett’s Berkshire Hathaway. There is an opinion that this will happen. “We’re talking about a path to creating a trillion-dollar company. I don’t think it’s unreasonable,” said a partner at one of the investment companies that supported OpenAI. The emergence of generative AI marks “the biggest platform win since cloud computing or the Internet,” investors say.
Despite the huge scale of fundraising, OpenAI is not experiencing a shortage of demand for investments. Thrive not only invested in the company, but also launched a mechanism through which other companies can get a stake in OpenAI. The high hopes for developer ChatGPT are remarkable even in Silicon Valley, where only a few major tech companies have risen to become trillion-dollar behemoths. To achieve a return on investment on the scale expected, OpenAI will need to overcome stiff competition from some of the richest technology companies in the world, including Google and Meta✴. Resources are needed to train increasingly expensive AI models, as well as competent management to move from a chaotically fast-growing startup to a stable corporate giant.
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OpenAI currently has annual revenues of about $3.6 billion, but it spends more than $5 billion a year and is “far from breaking even” as it invests heavily in new AI models and products to stay ahead of the competition. The additional billion-dollar investment will give OpenAI an advantage over Anthropic and Elon Musk’s startup xAI, which have also managed to attract multi-billion-dollar investments. OpenAI also has a strategic partnership with Microsoft, which some investors say they would prefer over Apple. However, some financial market participants doubt that investments in OpenAI will ever pay off; For others, the staggering scale of investment is intimidating because they are afraid of becoming overly dependent on one company.
There are doubts that OpenAI can continue to maintain its rapid pace of growth, having been rocked by a board crisis last November that saw CEO Sam Altman suspended for five days. Plans are being discussed to simplify OpenAI’s corporate structure, although the current funding round did not make the investment contingent on a possible restructuring. Several research executives have left the company this year; it was also embroiled in a legal dispute with Elon Musk, who quit the founding team in 2018, and a dispute with the New York Times. There are also signs of a cooling of relations with Microsoft, which invested $13 billion in OpenAI and has greatly benefited from its products. But now they are becoming direct competitors, as stated in Microsoft’s annual report.
OpenAI supporters, however, say the company’s growing pains are typical for a startup of its kind and draw parallels with the fledgling Google and Apple. The company has its first financial director – Sarah Friar – and the board of directors now includes many experts with experience in corporate structures, and this is a sign of a sober approach to company management.