Insider Brief
- OpenAI is in talks to raise several billion dollars in funding, potentially valuing the company at over $100 billion, as reported by the Wall Street Journal.
- Thrive Capital, along with Microsoft, is expected to lead the funding round, reinforcing their ongoing investments in OpenAI’s development of advanced AI technologies.
- OpenAI’s pursuit of artificial general intelligence (AGI) drives the need for substantial capital, with the company aiming to stay ahead in a fiercely competitive AI market.
OpenAI, the company behind the popular AI tool ChatGPT, is in discussions to secure a new round of funding that would value the firm at over $100 billion, as reported by The Wall Street Journal (WSJ). The funding round, led by Thrive Capital, is expected to bring in several billion dollars, including about $1 billion from Thrive itself, according to sources familiar with the matter.
Microsoft, which has been a significant backer of OpenAI, is also expected to participate in the round.
This latest funding effort marks one of the largest infusions of capital into OpenAI since Microsoft’s $10 billion investment in January 2023. Since then, the AI landscape has become increasingly competitive, with tech giants like Google, Amazon, and Meta all vying for dominance in the field. As WSJ reports, OpenAI was last valued at $86 billion late last year when employees sold existing shares, underscoring the rapid growth and high expectations surrounding the company.
Thrive Capital, a New York-based venture capital firm founded by Josh Kushner, has been a key partner for OpenAI, having already invested several hundred million dollars into the company. The new funding round is expected to solidify this relationship further, though it remains unclear which other investors will join the round. WSJ notes that the competition in the AI sector is fierce, with companies like Anthropic, a startup founded by former OpenAI executives, receiving $6 billion from Google and Amazon.
Maintaining its leadership in AI will require OpenAI to continue its significant spending on research and development, according to the paper. The company has already spent more than $100 million to develop GPT-4, its most advanced AI model to date. As OpenAI CEO Sam Altman has previously stated, the goal is to create artificial general intelligence (AGI), autonomous systems that can outperform humans at most economically valuable tasks. Achieving this goal will require processing vast amounts of data in supercomputer warehouses equipped with expensive, power-hungry chips.
According to WSJ, OpenAI’s revenue earlier this year was approximately $3.4 billion on an annualized basis, a figure that reflects the high expectations investors have placed on the company. However, the AI industry remains speculative, with current revenues falling short of the enormous investments being poured into it. Despite this, backers are betting that AI will fundamentally transform the way people and companies work, making the risk worthwhile.
One of the unique aspects of OpenAI’s structure is that investors do not technically own equity in the company, which operates as a nonprofit. Instead, they invest in a for-profit subsidiary and are entitled to a share of that entity’s profits. Microsoft, which has invested $13 billion in OpenAI since 2019, currently holds a 49% share of these profits. Some of Microsoft’s investment has flowed back to the tech giant, as OpenAI has hosted its technology on Microsoft’s Azure cloud platform.
The relationship between Microsoft and OpenAI continues to evolve. While Microsoft is likely to continue investing in OpenAI, the companies have increasingly become competitors. WSJ reports that Microsoft recently added OpenAI to its list of competitors in AI and search in a regulatory filing. Additionally, Microsoft has been broadening its AI portfolio by investing in and acquiring other AI startups, such as Inflection AI, whose CEO and team were hired by Microsoft earlier this year to develop AI tools for consumers.
OpenAI, on the other hand, is diversifying its partnerships as well. The company is working with Apple to integrate new AI features into the next generation of iPhones, according to WSJ. This move indicates that OpenAI is looking beyond its relationship with Microsoft to ensure its technology reaches a broader audience.
In recent weeks, one or more current OpenAI stockholders have been negotiating to sell their shares at a price that would value the company at $103 billion, WSJ reports. If successful, this would set a new benchmark for the company’s valuation and could attract even more investment as OpenAI continues to push the boundaries of what AI can achieve.
As the race to develop the most advanced AI systems heats up, OpenAI’s ability to secure significant funding will be crucial in maintaining its competitive edge. The company is not only focused on staying at the cutting edge of AI research but also on developing products that can be widely adopted across industries. With the backing of major investors like Thrive Capital and Microsoft, OpenAI is well-positioned to continue its rapid growth, even as the challenges and costs of developing AGI loom large.
