OpenAI in Talks to Raise $40 Billion at $300B Valuation

OpenAI in Talks to Raise $40 Billion at $300B Valuation

OpenAI is reportedly in early discussions to raise up to $40 billion in a funding round led by SoftBank, potentially valuing the ChatGPT maker at around $300 billion. This comes just months after OpenAI’s last valuation of $157 billion in October, signaling aggressive expansion plans amid growing competition in AI.

Key Takeaways

  • SoftBank to lead investment with $15 billion to $25 billion, assembling other investors for the rest.
  • Valuation nearly doubles from OpenAI’s October round, potentially reaching $300 billion.
  • Funds to support Stargate, a $100 billion AI data center initiative backed by OpenAI, SoftBank, and Oracle.
  • OpenAI continues to lose money, posting an estimated $5 billion loss in 2024 despite $3.7 billion in revenue.

If completed, the deal would be one of the largest private funding rounds in history, making OpenAI the world’s second-most valuable startup after SpaceX. The fresh capital would primarily support two critical initiatives: funding ongoing operations and fulfilling the company's $18 billion commitment to Stargate, an ambitious joint venture aimed at building AI data centers across the United States.

SoftBank, OpenAI, and Oracle Launch $500 Billion AI Infrastructure Initiative
Described as the largest AI infrastructure investment in history, Stargate will help transform the US into a global AI hub while addressing critical challenges like healthcare innovation and job creation.

The potential deal highlights the enormous capital requirements of leading AI companies as they race to build out computing infrastructure. Last year, OpenAI generated $3.7 billion in revenue while posting losses of approximately $5 billion. If successful, this funding round would nearly double OpenAI's valuation from $157 billion in October 2023, when it raised $6.6 billion.

This funding push arrives amid increasing competition from Chinese AI firms. DeepSeek's recent advances with more cost-efficient AI models have prompted some investors to question the capital-intensive strategies pursued by U.S. companies like OpenAI. The market's response to DeepSeek's progress was evident in the recent selloff of tech stocks, particularly affecting companies like NVIDIA.

Chinese AI Upstart DeepSeek Triggers Historic Tech Selloff
Despite US Government’s trade restrictions limiting access to advanced AI chips, DeepSeek was nevertheless been able to develop a frontier open-source model.

The scope of OpenAI's ambitions becomes clearer when examining the broader Stargate initiative. The project's partners, including SoftBank and Oracle, have pledged to invest up to $500 billion over four years in U.S. data center projects. This massive infrastructure build-out underscores the computing demands of advanced AI development and deployment.

Despite the eye-catching numbers, questions remain about OpenAI's path to profitability. The company's revenue is projected to reach $11.6 billion this year, but the scale of its investments and operating losses suggests a long road ahead. The willingness of investors to commit such substantial capital indicates their confidence in OpenAI's long-term potential, even as some investors raise questions about sustainable business models.

The deepening ties between OpenAI and SoftBank are particularly noteworthy. Beyond the proposed funding round, SoftBank has already demonstrated its commitment through a $500 million investment in October 2023 and a subsequent $1.5 billion tender offer to purchase existing shares from employees. For now, it seems SoftBank is considering OpenAI as its primary vehicle for capitalizing on the AI industry's growth.

As these funding discussions continue, they reflect broader shifts in the AI landscape. The unprecedented scale of investment required to compete at the highest levels of AI development is creating a clear distinction between companies that can access massive capital and those that cannot. This dynamic could have lasting implications for innovation and competition in the AI sector.

Chris McKay is the founder and chief editor of Maginative. His thought leadership in AI literacy and strategic AI adoption has been recognized by top academic institutions, media, and global brands.

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