OpenAI Devalues Itself (Again)

THE GIST

For the past few years, OpenAI has supported its high estimated value of $1.4 trillion, although people disagree about how much the company is worth. But that changed last week. According to The Financial Times, the company behind ChatGPT lowered its valuation to $1.25 trillion. That is a $150 billion drop and a major setback for both OpenAI and the wider AI industry.

WHAT HAPPENED

OpenAI cutting its estimated value is not a good sign. This looks even worse for a company whose product has an uncertain future, costs a huge amount of money to develop and run, and has not yet made a profit, by its own account.

"If we weren't continuing to grow our training costs by so much, we would be profitable way, way earlier. But the bet we're making is to invest very aggressively in training these big models," CEO Sam Altman said on the "Big Technology Podcast" last year.

Pay attention to the year he said that. OpenAI stopped training its most advanced AI models in August and late September 2026. It has not started again. Does this mean the company will soon make a profit? According to internal estimates seen by The Wall Street Journal, no. It might happen in 2030, or perhaps even later. OpenAI has not publicly promised a specific date or target year for when it expects to break even, meaning its income would cover its costs.

To be fair to Altman and the rest of his shrinking team, OpenAI is not the only company facing pressure. At least 14 senior executives and key leaders have left OpenAI so far this year. Meanwhile, investors are also pushing Anthropic, OpenAI's biggest competitor, toward an estimated $1.5 trillion value for a possible initial public offering (IPO), according to Reuters. That is 25% lower than the $2 trillion value people once expected for its planned November debut.

But perhaps the biggest warning sign comes from Morgan Stanley. The bank said its wealthy clients are less eager than before to invest more money in OpenAI.

"There has been zero clamoring," said one person quoted by the Financial Times. "All the prior times [OpenAI] have been on there's been a frenzy. This time is a bit of a thud."

That is bad news. No company wants to hear that investors have lost their excitement. Yet OpenAI is moving ahead with another $30 billion funding round, backed by investment funds in the United Arab Emirates and Coatue. The company describes this new funding as a "bridge" to help it reach a possible IPO, which has been discussed and delayed more than once. But it may look more like a desperate attempt to keep investors on board as some of them try to get out.

WHY IT MATTERS

Microsoft and other companies whose stock prices are linked to the AI boom were among the first to feel the impact when OpenAI lowered its valuation. This may seem unfair to people who own Microsoft shares, but it is part of the risk of being one of OpenAI's earliest and biggest supporters. To be blunt, OpenAI has also helped Microsoft grow quickly over the past few years.

Microsoft's stock has since risen 0.60%, ending last week on a higher note. But the timing is worth noting: Microsoft reached a record closing price just 10 days before the news came out. On October 13, MSFT traded at $543.45. Today, it trades at $524.50, one day after the Financial Times report. Many major technology stocks, including Nvidia, Google and Amazon, have fallen after reaching record highs. There is little reason to assume Microsoft's stock could not follow the same pattern.

There is another important detail. During a restructuring in October 2025, Microsoft took roughly 27% ownership of OpenAI Group PBC, its for-profit public benefit corporation. OpenAI also committed to spending an additional $250 billion on cloud services over the long term. Whenever people talk about OpenAI's long-term plans, Ed Zitron responds with an exasperated, very British sigh and an eye roll. Still, these agreements are real. Microsoft and many other companies have used deals like these to help explain their high stock prices and early investments over the past few years.

OpenAI's sudden decision to lower its own valuation now raises serious questions about those arguments.

WHAT'S NEXT

The worry in financial markets shows what can happen when a popular story runs into a hard fact: demand is weaker than it used to be.

If the reported lack of investor excitement is real, and OpenAI is not worth as much as it has suggested over the past year or so, what does that mean for the rest of the AI industry? Could it mean that the industry as a whole is worth less than people thought?

The same question applies to companies building large data centers for cloud computing, often called neoclouds, and to the energy companies that supply them with power. Energy suppliers may sell electricity under regulated prices or long-term contracts. But if AI companies cannot pay what they owe and those contracts fail, energy suppliers could suffer huge financial losses.

If demand continues to weaken, investors become more cautious and companies hesitate to take on even more debt from big technology firms, the trouble could spread from one company to another. That chain reaction could cause serious problems across the market. Even a $30 billion funding round, which is still a very large amount of money, might not be enough to stop it.