OpenAI Nears $1.25 Trillion Valuation. What That Tells Investors Ahead of a Potential 2027 IPO.
While its rival Anthropic is getting ready to go public as soon as November, OpenAI is close to finishing another round of fundraising.
OpenAI, the company behind ChatGPT, is about to raise $30 billion at a value of $1.25 trillion. Investors from the United Arab Emirates and Coatue, an investment firm, are leading the funding round.
Talks about this new round of funding began in September, when investors approached OpenAI.
This funding round has several important effects for OpenAI and the wider AI industry.
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OpenAI lowers its goals
OpenAI first aimed to reach a value of $1.5 trillion in this fundraising round. The lower target could be another sign that investors are losing interest in the AI industry. This comes after CoreWeave shares fell sharply and Meta shares dropped after the company reported negative free cash flow in its earnings report.
However, OpenAI's new target value is still much higher than the $852 billion valuation it received in the spring, so this change should not be a reason for concern.
Raising $30 billion is less than OpenAI raised in its last funding round, but it is still a large amount. If this smaller round makes it easier for the company to go public, it seems like a smart choice.
It also shows that OpenAI has fallen behind Anthropic, which is aiming for a $2 trillion valuation when it goes public next month. OpenAI CEO Sam Altman has told employees that now is not the right time for the company to go public, but the company is still aiming for an IPO in 2027.
Going public at the same time as Anthropic would be a mistake. It makes sense for OpenAI to wait a few months and give investors time to regain their interest in another very large IPO.
What this means for AI stocks
This new funding round is a positive sign for AI stocks at a time when they really need good news.
The future of the AI industry will ultimately depend on the success of Anthropic and OpenAI. These are the two leading AI research companies building the technology that people have come to call "AI." Both companies will eventually need to make a profit for their own high valuations, and the high values of other AI companies, to make sense.
The four biggest cloud computing companies are expected to spend more than $700 billion on equipment and other investments to build AI infrastructure. No investment cycle has ever been this large. This money is being spent so businesses and consumers can use generative AI and related tools from Anthropic, OpenAI, and other companies. Whether these investments pay off will depend on how quickly the AI companies grow and start making profits.
The biggest test will be Anthropic's IPO. The company filed confidential paperwork to go public last month and is expected to complete its IPO in November.
If Anthropic can reach a $2 trillion valuation and its stock price rises after the IPO, as happened with Space Exploration Technologies, AI stocks could recover. We will learn more when the company files its S-1 prospectus, which includes its full financial reports.