(April 1): OpenAI has completed a deal to raise US$122 billion ($156.85 billion) from investors at an US$852 billion valuation, marking the company’s largest funding round to date by far and bolstering its costly push for more chips, data centres and talent.
The bulk of the financing, which had been in the works for months, came from three large tech companies. Amazon.com Inc agreed to invest US$50 billion in the round, while Nvidia Corp and SoftBank Group Corp each put in US$30 billion. A large portion of Amazon’s investment — US$35 billion — is contingent on OpenAI going public or reaching the technological milestone of artificial general intelligence.
The ChatGPT maker also secured funding from a long list of other prominent backers, including Andreessen Horowitz, Abu Dhabi’s MGX, DE Shaw Ventures, TPG and T Rowe Price. The company’s valuation includes the money raised. Bloomberg News previously reported details of those talks and the financial terms of the deal.
The OpenAI funding is by any measure one of the largest transactions in history — dwarfing not just previous fundraising rounds by fellow privately backed startups but also acquisitions and initial public offerings. It reflects the enormous appetite to get in on a technology regarded as transformative for not just companies and industries but whole economies. The financing dwarfed recent funding rounds by fellow AI startups Anthropic PBC and xAI, data compiled by Bloomberg show.
In a first for the company, OpenAI raised more than US$3 billion from individual investors through bank channels. The startup also said it will be included in several exchange-traded funds managed by Cathie Wood’s Ark Invest, with the goal of offering more people exposure to the AI firm.
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OpenAI chief financial officer Sarah Friar said the financing “blows out of the water even the largest IPO that’s ever been done”. The deal, she said, is meant to give the company “a lot of flexibility” to invest in computing resources and its AI roadmap at a time of broader uncertainty for the public markets, including from the Iran war.
The AI developer has previously said it’s committed to spending more than US$1.4 trillion on physical infrastructure in the coming years to support its AI software. To finance those bets, OpenAI and rival Anthropic have tapped an overlapping group of venture funds and tech companies, including their cloud and chip suppliers like Amazon and Nvidia. The complex web of tie-ups has sparked concerns about the fallout if the technology doesn’t match today’s lofty expectations.
The two startups are also expected to go public as soon as this year, bringing in additional capital and testing Wall Street’s appetite for unprofitable but fast-growing AI businesses. Friar said OpenAI needs to be “public-company capable”, referring to it as “good hygiene” for a business, without sharing specific details of plans for an initial public offering. She also said an IPO can serve as a “trust-building moment” for a firm.
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OpenAI said Tuesday that it’s currently generating US$2 billion in revenue each month. The company, which gained household attention as a product for everyday users, is also seeing traction among business customers. Enterprise sales now make up 40% of its revenue, the company said, with that figure expected to increase to 50% by year’s end.
The company’s financial commitment from Amazon also comes with a cloud agreement to host and distribute OpenAI’s models for enterprise customers. That partnership will include a revenue-sharing agreement, Friar said, without disclosing how much.
OpenAI has stepped up its revenue push this year by introducing advertising in ChatGPT, an option that chief executive officer Sam Altman had once described as a “last resort”. The company, which has traditionally relied on a subscription model, said its ads pilot programme hit US$100 million in annualized revenue after just six weeks.
In recent weeks, OpenAI has moved to streamline its sprawling mix of products. The company said it is discontinuing support for the Sora AI video generator. It is also developing a desktop application to bring together its chatbot, coding tool and web browser — a product that OpenAI is referred to in its blog post as “our SuperApp”.
“Users do not want disconnected tools. They want a single system that can understand intent, take action, and operate across applications, data, and workflows,” the company said in a blog post Tuesday, confirming the plans.
In a staff memo about the decision to nix Sora, Altman said OpenAI will also be reorganising some of its security and safety teams to better integrate that work into the development process and give the CEO more time to focus on infrastructure projects and raising capital.
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