FT: OpenAI Cuts Its Funding Round to About $20 Billion and Its Valuation Target to $1.25 Trillion
BREAKING: OpenAI has slashed its funding target by -$10 billion and its valuation by -$150 billion amid this week's technology stock selloff, per FT. OpenAI is now seeking to raise $20 billion at a $1.25 trillion valuation, down from $30 billion at a $1.4 trillion valuation. The company set a deadline of today for investors to commit to the funding round. That "first close" is now expected to bring in less than $20 billion, after some of its investors lowered their allocations to the round. This comes just weeks before the expected Anthropic IPO.
Context
The most valuable AI startup lowering its price during a tech selloff is a clear sign that investors are getting more cautious about the cost of the AI race.
OpenAI has been raising a new private round ahead of a public listing it has pushed to 2027, while rival Anthropic is expected to go public in November. US tech stocks fell sharply this week on worries about AI spending, with the Nasdaq down 7.8% from its October 6 high.
Deep dive
The Financial Times reported on Friday that OpenAI has cut the target for its latest funding round by 10 billion dollars, citing people with knowledge of the matter. According to the report, OpenAI is now seeking about 20 billion dollars at a 1.25 trillion dollar valuation, down from a plan to raise 30 billion dollars at 1.4 trillion.
The FT said OpenAI set a Friday deadline for investors to commit. Its first close is now expected to raise less than 20 billion dollars after some investors lowered their allocations. Reuters, summarizing the FT, said a consortium of UAE investors including the state backed fund MGX is expected to be the largest participant, and that OpenAI would gain an option to lease new computing capacity in the region. Founders Fund, Coatue, Sequoia Capital and Andreessen Horowitz are also expected to take part, and wealthy individuals would get a later retail offering at the 1.25 trillion valuation.
The cut comes during a rout in US tech stocks driven by worries over AI spending. Reuters noted the Nasdaq fell 2.9% on Friday. Reuters has also reported that OpenAI wanted to close the round before Anthropic's expected listing in mid November, since the two labs are courting a similar pool of investors.
What to expect next
Watch how much money the first close actually brings in and whether OpenAI confirms the new terms. Anthropic's listing in November will set a public market price for a frontier lab, which could either support or pressure OpenAI's private valuation. If the tech selloff continues, other AI companies raising money may also have to accept lower prices or smaller rounds. The role of UAE investors and the computing capacity deal tied to the round are also worth following.