OpenAI has Closed a $40b Funding Round, Now Valued at $300B

On Monday, OpenAI said that it has concluded the biggest private tech fundraising round ever.

Including the new funding, the highest private tech investment round was finished by OpenAI, which raised $40 billion and valued the ChatGPT creator at $300 billion among leading private tech companies, which is almost three times as much as it has privately raised.

According to CB Insights, the valuation places OpenAI among the most highly valued private firms in the world, second only to SpaceX at $350 billion, and even ahead of TikTok parent company ByteDance.

With $30 billion, SoftBank of Japan is heading the round. A syndicate of additional backers, including Microsoft, Coatue, Altimeter, and Thrive, are also involved.

In a blog post, the purpose of the funding from OpenAI stated that it intends to utilize the additional funding to “push the frontiers of AI research even further” and expand its computing infrastructure. According to a person familiar with the situation, OpenAI’s pledge to Stargate is anticipated to absorb around $18 billion of the funds, CNBC said. In January, President Donald Trump launched the SoftBank, OpenAI, and Oracle joint venture.

By the end of 2025, the remaining $30 billion will be added to the $10 billion in initial investment, the source stated. However, there is a catch to the round. In a revised report on Monday, SoftBank stated that if OpenAI doesn’t transform into a for-profit company by December 31, its whole investment might be reduced to as little as $20 billion.

Elon Musk, one of the co-founders of OpenAI in 2015 when it was founded as a non-profit research lab, has challenged the provision in court, putting more pressure on the company to complete the for-profit conversion. This plan will require the approval of Microsoft and the California Attorney General.

The company’s current hybrid structure is a capped-profit limited partnership, established in 2019, where the original nonprofit holds the majority of shares. If OpenAI restructures, the nonprofit would spin out as a separate legal entity, and convertible notes issued to venture funders could be converted into stock. However, despite being a major milestone, the financing comes with constraints. SoftBank has indicated that its total investment could drop to as little as $20 billion if OpenAI does not transition into a for-profit company by December 31, as its current structure limits investor profits and reinvests excess funds into research. Restructuring would remove this cap, allowing unlimited profits to be distributed to investors.

Before OpenAI’s 40 billion round, the largest private tech fundraising deals included Ant Group’s 14 billion in 2018, Juul Labs’ 12.8 billion in 2018, and DiDi Global’s 10.8 billion in 2019, according to PitchBook. More recently, Databricks raised 10 billion in December, and OpenAI itself secured a 10 billion round in 2023, making it one of the biggest fundraising rounds in recent years.

The forecasts for user growth and income allows investors like SoftBank to place bets that ChatGPT’s rapid expansion will continue. ChatGPT now has 500 million weekly users, up from 400 million last month, according to OpenAI on Monday. By the end of this year, OpenAI anticipates that its income will have tripled to $12.7 billion.

Although the ChatGPT debut was “one of the craziest viral moments it had ever seen,” according to CEO Sam Altman’s post on X on Monday, “we added one million users in five days,” the firm “added one million users in the last hour.”

Within ten years, the generative AI sector is expected to generate over $1 trillion in revenue. As the race to develop “AI agents” heats up, businesses ranging from Google and Amazon to Anthropic and Perplexity are scrambling to unveil new features and products.

Last week, OpenAI revealed some significant changes to its C-suite, with CEO Sam Altman reorienting his priorities from daily operations to research and product development. Brad Lightcap, the operating chief, will now be responsible for “business and day-to-day operations.”

“We added one million users in five days, and we added one million users in the last hour,” he said, describing it as one of the most bizarre viral events he had ever witnessed.

Despite a difficult beginning, CoreWeave was the first pure-play AI startup to go public, and OpenAI’s funding followed shortly after. The stock was steady on its first day on the market on Friday after cutting its IPO price, and then dropped more than 7% on Monday.

During his company’s earnings call earlier this month, Mark Klein, CEO of SuRo Capital and an OpenAI investor, informed investors that OpenAI will be included in the next round of expected initial public offerings (IPOs) in his portfolio “at some point in time.”

Within ten years, the AI sector is expected to generate over $1 trillion in revenue. Big tech companies like Google, Amazon, Perplexity, and Anthropic are accelerating AI advancements, especially in the competition to create AI agents. 

Chief Operating Officer Brad Lightcap will have a more expansive role supervising the company’s business and day-to-day operations, while Sam Altman will transfer his attention from day-to-day operations to research and product development, according to OpenAI’s announcement of leadership changes last week.