OpenAI targets $30B at $1.4 trillion valuation
What's the story
OpenAI is fast-tracking a major fundraising round, hoping to secure investor commitments before rival Anthropic's public market debut in mid-November. The move comes as part of an unusual and aggressive strategy that could value the ChatGPT maker at over $1.4 trillion. The accelerated timeline is partly due to a desire to stay ahead of Anthropic as both AI labs continue to target the same pool of investors.
Investor interest
Tensions rise as AI labs vie for investor attention
The rapid fundraising round is expected to raise some $30 billion, with SoftBank Group, Abu Dhabi-based MGX, and other existing backers of OpenAI in talks to participate.
The move highlights the intense competition between the two AI developers for capital as they both pursue trillion-dollar valuations.
This comes amid rising interest rate concerns, significant technology stock volatility, and increased scrutiny of AI valuations.
Strategic move
Funding round expedited due to potential IPO market downturn
OpenAI's funding round is likely to be expedited, unlike other offerings of its size.
The company recently met with long-only funds and sovereign wealth funds while Anthropic hosted its own investor day.
Investors familiar with the company say OpenAI needs capital to fund its substantial infrastructure commitments and strengthen its balance sheet if a downturn in IPO markets further postpones its planned 2027 listing.
Financial performance
OpenAI's revenue growth and pricing strategy
OpenAI is pitching investors on its accelerated growth after the launch of its GPT-6 Astra model.
The company claims it has hit an annualized revenue of $50 billion and expects it to rise to $70 billion by year's end.
OpenAI has also slashed prices on its cheaper models, which has reportedly boosted usage.
The company is looking to close the fundraising before Anthropic's financial disclosures give investors a clearer view of its business and invite comparisons between the two companies.
Market position
Concerns over Anthropic's valuation amid slowing revenue growth
Anthropic's annualized revenue reached some $65 billion by July. Its quarterly revenue surged to $16.8 billion in Q3 from $11.6 billion in Q2 this year, according to investor reports.
However, slowing month-on-month revenue growth has raised concerns among investors about its valuation.
Some existing and prospective Anthropic investors have argued for a market debut valuation closer to $1.5 trillion instead of the desired $2 trillion after the AI start-up's third-quarter results missed expectations.