On Monday, OpenAI revealed that it has closed the biggest private tech funding round ever. Including the new funding, the $40 billion deal values the ChatGPT creator at $300 billion. According to PitchBook, it’s almost three times as much as a private tech business has previously raised.
At $350 billion, OpenAI is ranked second only to SpaceX, and even TikTok parent company ByteDance is among the most valuable private companies in the world, according to CB Insights.
Leading the investment with $30 billion is SoftBank of Japan, with a syndicate of additional investors that includes Microsoft, Coatue, Altimeter, and Thrive in addition to the primary investor.
OpenAI stated that it intends to use the additional funding to “push the frontiers of AI research even further” and expand its computing infrastructure. According to the source familiar with the situation, OpenAI’s promise to Stargate is anticipated to absorb roughly $18 billion of the investment. In January, President Donald Trump announced the SoftBank, OpenAI, and Oracle joint venture.
The source stated that $10 billion will be used for the first funding, with the remaining $30 billion to be provided by the end of 2025. However, there is a catch to the round. In a revised report on Monday, SoftBank stated that if OpenAI doesn’t transform into a for-profit company by December 31, its entire investment might be reduced to as little as $20 billion.
Elon Musk, one of the co-founders of OpenAI in 2015 when it was founded as a non-profit research lab, has challenged the provision in court, putting more pressure on the company to complete the for-profit conversion. This plan will require the approval of Microsoft and the California Attorney General.
In 2019, the company established a capped-profit limited partnership as part of its current, unique hybrid structure. If the business is able to restructure, the original nonprofit, which currently has the majority of the shares, will spin out as a separate legal entity. Convertible notes that could be converted into equity have been given to OpenAI’s venture funders.
Ant Group’s $14 billion capital round in 2018 was the biggest private transaction before OpenAI’s round. According to PitchBook, Juul Labs raised $12.8 billion in 2018 and DiDi Global raised $10.8 billion the following year. Next are the $10 billion rounds from Databricks in December and OpenAI in 2023.
Investors like SoftBank are placing bets that ChatGPT‘s rapid expansion will continue. ChatGPT now has 500 million weekly users, up from 400 million last month, according to OpenAI on Monday. By the end of this year, OpenAI anticipates that its income will have tripled to $12.7 billion.
CEO Sam Altman wrote on X on Monday that the ChatGPT appear was “One of the most crazy viral moments I’ve ever witnessed,” but that “In just five days, we added one million user, the company, In the past hour, one million new users have joined.“
In ten years, the generative AI market is expected to generate over $1 trillion in revenue. As the race to develop “AI agents” heats up, businesses ranging from Google and Amazon to Anthropic and Perplexity are scrambling to unveil new features and products.
Last week, OpenAI revealed some significant changes to its C-suite, with CEO Sam Altman reorienting his priorities from daily operations to research and product development. The operating chief, Brad Lightcap, will now be in charge of “business and daily activities in charge“.
Despite a difficult beginning, CoreWeave was the first pure-play AI startup to go public, and OpenAI‘s funding follows shortly after. The stock was steady on its first day on the market on Friday after cutting its IPO price, and then dropped more than 7% on Monday.
During his company’s earnings call earlier this month, Mark Klein, CEO of SuRo Capital and an OpenAI investor, informed investors that OpenAI would be included in the next round of expected initial public offerings (IPOs) in his portfolio “at some point in time.”
