OpenAI reportedly cuts funding target by $10B ahead of IPO
What's the story
OpenAI has reportedly lowered its funding target for the latest round by $10 billion. The company is now seeking to raise $20 billion at a valuation of $1.25 trillion. The decision comes after the company's initial plans to raise $30 billion at a $1.4 trillion valuation, ahead of a planned IPO. The Financial Times reported that the first close is likely to be even lower than this revised target.
Investor participation
Funding round to be led by UAE investors
The upcoming funding round will be led by a group of investors from the UAE.
A secondary retail offering for high-net-worth individuals could help reach the revised target of $20 billion.
So far, OpenAI has raised $11 billion, but its fundraising efforts have been met with a "tepid" response from some large investors, The Wall Street Journal reported.
Market challenges
Funding challenges exacerbated by market conditions
OpenAI's reported funding challenges could be due to unfavorable market conditions.
Wall Street investors are wary of heavy AI infrastructure spending, resulting in a major sell-off of tech stocks. The Nasdaq 100 index fell by 3.5% on Friday amid these concerns.
The impending public listing of rival Anthropic may also be affecting investor commitments to OpenAI's funding round.
Investor lineup
Major participants in OpenAI's funding round
A group of UAE investors, including state-backed MGX, is expected to be the largest participant in OpenAI's funding round.
SoftBank Group Corp. and venture capital firms including Sequoia Capital, Coatue Management, Founders Fund and Andreessen Horowitz are also expected to participate.
The fundraising effort is being closely watched as it comes amid a broader market downturn for tech stocks due to concerns over high AI spending.