OpenAI cuts valuation target by $150 bn to $1.25 tn | Why it has scaled back its funding ambitions ahead of IPO
OpenAI has cut its target value by $150 billion to $1.25 trillion. The company is close to finishing talks to raise up to $30 billion in new funding. This comes as investors worry about how much money companies are spending on artificial intelligence (AI).
OpenAI, the company behind ChatGPT, had earlier discussed a value of $1.4 trillion, Bloomberg reported, citing people who know about the talks. The discussions are still going on, and the final deal could change, these people said.
The proposed $1.25 trillion value does not include the new money OpenAI hopes to raise. In March, the company raised $122 billion when it was valued at $852 billion.
Investment firm Coatue Management is discussing a plan to help lead the new funding round, according to the people familiar with the matter. OpenAI has also been talking with several investment funds from the United Arab Emirates and other companies, including BlackRock Inc., Bloomberg reported earlier.
OpenAI expects investors to confirm how much money they will put in by the end of next week, according to Bloomberg's sources.
Why has OpenAI lowered its target value?
OpenAI has lowered its target as investors take another look at how much AI companies are worth. Technology company shares fell this week after companies including Meta Platforms and Tesla reported mixed financial results for the latest quarter. These results have made investors look more carefully at how much companies are spending on AI and how much money they might earn from those investments.
What does this mean for OpenAI's IPO plans?
OpenAI has delayed its plans for an initial public offering (IPO) until next year. An IPO is when a company first offers its shares for people to buy on the stock market. OpenAI says it is focusing on making AI safer. The company privately submitted its IPO documents to the US Securities and Exchange Commission in June, but it has not announced an exact date for selling its shares to the public.
In August, OpenAI's chief financial officer, Sarah Friar, told employees that the company would become publicly traded in 2027. The following month, chief executive Sam Altman said that going public at that time would not be a wise decision.
Meanwhile, OpenAI's competitor Anthropic is getting ready for an IPO that is expected next month. Reports say Anthropic wants to be valued at between $1.5 trillion and $2 trillion. In May, the company raised $65 billion when it was valued at $965 billion.
Investors will closely watch how people respond to Anthropic's shares when they become available on the stock market. This will help them decide how much other AI companies might be worth.
Meanwhile, DeepSeek, a Chinese AI startup, has raised about 100 billion yuan ($14.98 billion) in its latest funding round. Its investors include chipmaker GigaDevice, food delivery company Meituan and carmaker Geely, according to four people who know about the deal.
Sources have said DeepSeek is valued at 500 billion yuan before counting the new investment. The company has now raised twice as much as its original goal of 50 billion yuan. This increase shows that investors remain very interested in Chinese AI companies. Many of these investors are supported by the government or large businesses. China is also working to keep up with the United States in the race to develop AI.
(With information from Bloomberg and CNBC)