OpenAI shrinks its latest funding round to $20 billion after investors pull back

A smaller round at a lower price

As www.trendingtopics.eu reported, citing the Financial Times, OpenAI has reduced the target of its current private funding round by $10 billion, to $20 billion. The price investors are being asked to pay has also slipped. The company is now aiming for a valuation of $1.25 trillion instead of $1.4 trillion, a reduction of $150 billion.

The reason, according to people familiar with the matter, is that some investors scaled back what they had planned to put in. The deadline for firm commitments passed on Friday, and the first close, meaning the first batch of money actually collected, might come in under the new target.

One backer told the FT that the round began while excitement over AI stocks was high and was then caught off guard when the market turned sharply.

Who is still writing checks

The biggest contributor is expected to be a group from the United Arab Emirates that includes MGX, a tech fund backed by the state. In exchange, OpenAI would get the option to lease newly built computing capacity in that region.

Several well-known venture firms are also expected to take part: Founders Fund, Coatue, Sequoia Capital and Andreessen Horowitz, along with Masayoshi Son's SoftBank. Wealthy individuals are then set to be offered a chance to invest at the same valuation, which one person said could still carry the round to roughly $20 billion.

OpenAI, Sequoia, Founders Fund and SoftBank all declined to comment to the FT. MGX, Coatue and Andreessen Horowitz had not replied when the paper went to press.

A bridge, because the stock listing is on hold

This round is meant to tide the company over, because OpenAI has put its plan for a public stock listing (an IPO) on the shelf for now. It filed confidentially in June. In September, chief executive Sam Altman said it would not happen this year, and, according to TechCrunch, called it an ill-advised moment to go public given the debate over safety. The chief financial officer, Sarah Friar, had told staff in August that the company would be publicly traded in 2027.

For scale, in March OpenAI raised $122 billion at a valuation of $852 billion, from backers including Amazon, SoftBank and Nvidia. Even so, the company plans to spend far more than that on the computing power needed to build and operate its AI models.

Why investors are uneasy

The pullback comes as the market grows more doubtful about the huge sums going into AI. On Friday the tech-heavy Nasdaq Composite fell 2.9 percent after disappointing results from Alphabet, Amazon and Intel, leaving it 7.8 percent below its early-October record, per the FT.

OpenAI's own figures add to the questions. Its annualized revenue run rate, which takes a recent period's sales and projects them across a full year, was about $50 billion at the end of September, according to the FT and Reuters. Investors had earlier been given $68 billion to $70 billion. The gap comes mostly from revenue earned through cloud partners, which OpenAI does not record in full. The company also expects to burn through $278 billion in cash by 2030.

A web of companies tied to one customer

The shortfall matters beyond OpenAI. Oracle has a contract with the company worth about $300 billion and carries net debt of about $132 billion. CoreWeave, a cloud provider, has net debt of about $46 billion, and Nvidia owns a stake in OpenAI of about $30 billion. If OpenAI cannot pay for the computing power it has ordered, those companies would feel it.

Early in October, Oracle and CoreWeave fell more than 5 percent and almost 8 percent in a single day as doubts about OpenAI's ability to pay came up.

There is also competition for the same pool of money. OpenAI wanted its commitments locked in before Anthropic's IPO, expected in mid-November. Anthropic, maker of Claude, has published its prospectus and is reportedly set to be valued at $1.5 trillion or more, per the FT. Both firms are courting the same large institutions.

What still works in OpenAI's favor

The picture is not all negative. At $1.25 trillion, OpenAI would still be the most valuable private company in history, and a $20 billion round remains among the largest ever. Revenue reportedly grew 77 percent in the third quarter and 107 percent in its business-customer segment, though those numbers are unaudited. The company still expects a run rate of $70 billion or more by year-end, according to media reports.

Altman has argued that the delayed listing has little to do with market mood and more to do with safety debates and whether society is ready.