OpenAI has reached a deal to raise $122 billion from investors at a valuation of $852 billion, marking by far the largest investment round in the company’s history and reinforcing its costly push for more chips, data centers and talent.
Most of the financing, which had been structured for months, came from three large technology companies. Amazon agreed to invest $50 billion in the round, while Nvidia and SoftBank each put in $30 billion. A large portion of Amazon’s investment — $35 billion — is contingent on OpenAI going public or reaching the artificial general intelligence (AGI) technology milestone.
The creator of ChatGPT has also secured funding from a long list of other prominent investors, including Andreessen Horowitz, Abu Dhabi’s MGX, DE Shaw Ventures, TPG and T. Rowe Price. The company’s valuation includes the money raised. THE Bloomberg News had previously disclosed details of these negotiations and the financial terms of the agreement.
In a first for the company, OpenAI has raised more than $3 billion from individual investors through banking channels. The startup also said it will join several exchange-traded funds (ETFs) managed by Cathie Wood of Ark Invest, with the aim of giving more people exposure to the AI company.
OpenAI CFO Sarah Friar said the funding “hands down even the biggest IPO ever.” The agreement, according to her, was designed to give the company “a lot of flexibility” to invest in computing resources and its roadmap of AI at a time of greater uncertainty in public markets, including factors linked to the war in Iran.
The AI developer has already said it is committed to spending more than $1.4 trillion on physical infrastructure over the next few years to support its artificial intelligence software. To finance these bets, OpenAI and its rival Anthropic have turned to an overlapping group of venture capital funds and technology companies, including their cloud and chip suppliers such as Amazon and Nvidia. This complex web of alliances has raised concerns about the consequences if technology doesn’t live up to today’s lofty expectations.
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The two startups are also expected to go public this year, raising additional funding and testing Wall Street’s appetite for unprofitable but fast-growing AI companies. Friar said OpenAI needs to be “able to operate as a public company,” calling it “good hygiene” for a business, without sharing specific details about IPO plans. She added that an initial public offering could serve as a “confidence-building moment” for the company.
OpenAI stated this Tuesday (31) that it currently generates US$2 billion in revenue per month. The company, which gained notoriety among the general public as a product for ordinary users, is also gaining traction with corporate customers. Sales to companies already account for 40% of revenue, said the company, with the expectation that this share will reach 50% by the end of the year.
Amazon’s financial commitment also comes with a cloud agreement to host and distribute OpenAI models for enterprise customers. This partnership will include a revenue sharing agreement, Friar said, without revealing the amounts.
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OpenAI intensified its quest for revenue this year by introducing advertising into ChatGPT, an option that CEO Sam Altman previously described as a “last resort.” The company, which relies on a subscription model, said the ad pilot program reached $100 million in annualized revenue in just six weeks.
In recent weeks, OpenAI has started to streamline its extensive product portfolio. The company said it will discontinue support for the AI-based Sora video generator. It’s also developing a desktop app that will bring together its chatbot, programming tool, and browser — a product that OpenAI called in its blog post “our SuperApp.”
“Users don’t want disconnected tools. They want a single system that can understand intent, act, and operate across applications, data, and workflows,” the company said in a blog post on Tuesday, confirming the plans.
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In an internal memo on the decision to shut down Sora, Altman said OpenAI will also reorganize some of its security and reliability teams to better integrate that work into the development process and free up more of the CEO’s time to focus on infrastructure projects and fundraising.
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