OpenAI seeks $30 billion funding at $1.4 trillion valuation ahead of Anthropic IPO

MUMBAI: OpenAI is moving quickly to get investors to agree to provide about $30 billion in a new funding round. The deal could value the company behind ChatGPT at more than $1.4 trillion. A Reuters report says OpenAI wants to raise the money before its rival Anthropic is expected to sell shares to the public in mid-November.

Existing investors, including Japan's SoftBank Group and MGX, based in Abu Dhabi, are discussing whether to take part in the funding round, the report said. It cited people who know about the talks. OpenAI has also met with investment funds that mainly invest in publicly traded companies and with sovereign wealth funds, which are investment funds owned by governments. The company is trying to finish raising the money in an unusually short time.

The fast fundraising effort comes as the two AI companies compete for money from many of the same investors. OpenAI also wants to benefit from recent revenue growth after launching new AI models. It needs money to pay for its large infrastructure commitments and strengthen its finances before its planned stock market listing in 2027.

According to the report, OpenAI is telling investors that its yearly revenue, based on its current rate of earnings, has reached $50 billion. It could rise to $70 billion by the end of the year. The company has also lowered prices for its cheaper AI models. OpenAI says the lower prices have led to more use of these models and could allow it to cut prices further.

Reuters previously reported that Anthropic's yearly revenue, based on its current rate of earnings, reached about $65 billion by July. Anthropic told investors that its revenue for the third quarter was $16.8 billion, up from $11.6 billion in the second quarter. However, its revenue has been growing more slowly from one month to the next. This has raised questions about how much the company is worth.

OpenAI wants to finish raising the money before Anthropic shares financial details that investors can use to compare the two companies, Reuters reported. Investors may also look more closely at how each company counts its revenue. OpenAI counts revenue after taking away the shares paid to its partners. It has accused Anthropic of counting the full value of contracts sold through outside cloud service providers. Anthropic says it follows accepted accounting practices.

OpenAI was valued at $852 billion in March after it raised $122 billion. That funding round included a promise from Amazon to invest up to $50 billion.

The fundraising effort comes as investors become more cautious about the value of AI companies, their infrastructure spending and how they pay for data centres. Bond yields are rising, oil prices are changing sharply, and technology stocks have recently fallen. These changes have made financial markets less stable and created difficulties for companies planning to sell shares to the public.

Some companies have delayed or paused their plans to go public because they do not want to compete with Anthropic for investors' money. According to the report, AirTrunk REIT, backed by Blackstone; Firmus, backed by Nvidia; and SB Energy, backed by SoftBank, have either cancelled or paused their plans to list shares. Holtec, a company that provides nuclear energy services, also cancelled its planned US stock market listing last month. It pointed to uncertainty about demand from data centres.

Investors are also debating how much Anthropic is worth. Some current and potential investors have argued that its expected IPO should value the company at closer to $1.5 trillion, rather than the $2 trillion it is seeking. Reuters reported that the debate followed third-quarter results that were below expectations.

Companies that build and provide AI infrastructure are also facing pressure. CoreWeave's shares and debt fell sharply as investors examined the nearly $50 billion the company has borrowed to pay for its expansion. Semiconductor stocks have also suffered large losses. These falls reflect worries about the high cost of the AI investment boom and whether it can continue at its current pace.

OpenAI's rapid effort to raise money shows how difficult it is for both companies to reach valuations of more than $1 trillion in a market that has become less stable. Investors are weighing the companies' strong revenue growth against the high cost of building infrastructure and uncertainty about how much money these investments will earn in the future.