For good reason. A valuation of more than $100 billion for OpenAI would seem huge in the world of venture capital investment, but it would only be a modest increase from the level at which the ChatGPT maker was valued in its last funding round in February. The surprisingly modest increase makes sense.
The Microsoft-backed company is in talks to raise new money from investors, according to the Wall Street Journal reported On Wednesday, citing people familiar with the matter, its latest round of funding, which closed In February, its valuation more than doubled to $86 billion. Assuming it hits the low end of its target this time around, the increase would be a modest 16%. Shares of AI darling Nvidia are up 73% over the same period, as of Wednesday’s close. A basket of tech stocks that includes Nvidia, Microsoft, Alphabet, Amazon, Meta, Palantir and Apple is up 21%, according to Breakingviews’ calculations.
OpenAI’s business is also growing rapidly. The company has achieved monthly revenue of $283 million and expects sales of between $3.5 billion and $4.5 billion in 2024, according to a report. July Report According to The Information, if it hits the midpoint of that range, OpenAI will have grown its revenue by an impressive 300% this year. A $100 billion valuation would be equivalent to 25 times 2024 revenue, half the level at which Nvidia was trading on Wednesday, according to the estimate of analysts surveyed by LSEG.
But there are good reasons for this seemingly trivial valuation increase. The company led by Sam Altman has faced According to media reports, there has been an exodus of top executives, including co-founder John Schulman, who joined OpenAI rival Anthropic. The company needs to invest heavily in smarter AI models. And hopes that Microsoft, one of its owners, could buy it are fading, given likely opposition from antitrust watchdogs. The group led by Satya Nadella resigned from a board seat in July.
Competition has also increased. Google’s DeepMind, Elon Musk’s xAI, Amazon-backed Anthropic, and Meta are all building smaller but effective AI models. OpenAI’s ChatGPT still holds the top spot on the AI industry leaderboard. Lmsys Chatbot ArenaBut its rivals are catching up fast and have plenty of cash. Musk’s xAI raised $6 billion in May from investors who valued it at $24 billion. Nvidia’s valuation is helped by the fact that its chips have limited rivals. Unfortunately for OpenAI, its customers are spoiled for choice.
Context news
OpenAI is in talks to raise several billion dollars in a new funding round that would value the startup behind ChatGPT at north of $100 billion, the Wall Street Journal reported on Aug. 28, citing people familiar with the matter. Venture capital firm Thrive Capital is leading the round and will invest about $1 billion, the WSJ reported. Microsoft is also expected to put up money. OpenAI was valued at $86 billion in a funding round that closed in February 2024. In a memo to employees, OpenAI Chief Financial Officer Sarah Friar said the funding will support the need for computing power and other operating expenses, Bloomberg reported on Aug. 28, citing people familiar with the matter.
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