OpenAI cuts $10 billion from funding round target to about $20 billion amid tech stock slump
Key Facts
OpenAI has cut its funding round target by about $10 billion to nearly $20 billion, according to a Financial Times report cited by Reuters on October 30. The reduction comes alongside a selloff in technology stocks fueled by investor concerns about spending related to artificial intelligence. The valuation the company is seeking has also fallen to $1.25 trillion from $1.4 trillion, according to the report. The deadline for investors to commit to the round was Friday, October 30. However, the first close was expected to raise less than $20 billion after some investors reduced their allocations.
The report expected a consortium of Emirati investors, including state-backed MGX, to be the largest participants in the round. As part of arrangements linked to the consortium, OpenAI may receive an option to lease new computing capacity in the region. Venture capital firms Founders Fund, Coatue, Sequoia Capital and Andreessen Horowitz are also expected to participate. As for SoftBank, a Reuters report on October 19 said it was in talks to join the round with MGX and other existing investors. SoftBank's official statement on its investment in OpenAI on October 1 did not say it would participate in the new round, so any potential participation remains part of the talks cited in the report.
Reuters reported on October 19 that OpenAI was seeking investor commitments quickly ahead of the expected public debut of its rival Anthropic in mid-November. The round was then estimated at about $30 billion, with a potential valuation above $1.4 trillion, illustrating the scale of the adjustment to the target and valuation in the latest report. The accelerated fundraising was linked in part to competition for an investor base shared by the two companies. In that report, OpenAI told investors its annualized revenue had reached $50 billion after the launch of the GPT-6 Astra model. It expected that run rate to rise to $70 billion by year-end, Reuters reported.
Reuters linked the lower funding target to technology stock selloffs driven by investor concerns about spending on artificial intelligence. The Nasdaq Composite fell 2.9% on Friday, October 30, and was down 7.8% from the record closing high it set on October 6. In SoftBank markets, the company's shares closed at $13.83 on October 30, according to EL7 data. The stock had closed at $15.23 on October 28, the same data showed. The data provided do not include the stock's intraday high on October 30.
OpenAI needs capital to fund its large infrastructure commitments and strengthen its balance sheet, according to a Reuters report on October 19. The report said worsening IPO markets could delay the listing the company is planning for 2027, increasing the importance of financing ahead of that date. Reuters also reported on October 30 that OpenAI was seeking a listing in 2027 and had been interested in closing the round in part before Anthropic's expected listing. This timeline places the round in the context of financing infrastructure needs and preparing for a potential public offering. The report did not specify a new date for completing the round after the first close expectations.