OpenAI trims funding target by $10 billion amid market sell-off

A shift in funding goals

OpenAI has reportedly adjusted its expectations for its latest funding round. The company is now aiming to raise approximately $20 billion at a valuation of $1.25 trillion. This represents a significant reduction from its initial target of $30 billion at a $1.4 trillion valuation.

The report from Stocktwits indicates that the company had originally pointed to a sharp rise in revenue since July to justify a nearly doubled valuation from $852 billion. However, the company has since tempered these ambitions as it faces a tougher market backdrop and increased scrutiny regarding the scale of AI spending.

Investors have already begun to react to these changes by reducing their allocations. The company had set a deadline for investors to commit to the round on Friday, and the initial close was expected to bring in less than the original $30 billion goal.

Market pressure and sell-offs

The funding reset follows a sharp sell-off in technology stocks that has impacted the broader market. The tech-heavy Nasdaq 100 fell 3.5% on Friday and registered its worst month since March 2025. Specifically, the index closed lower by 6.65% in October, which was its worst monthly performance since it fell 7.69% in March 2025.

One OpenAI backer noted that the fundraising process started during a period of high enthusiasm for artificial intelligence. The process was then caught by a sudden reversal in market sentiment. This shift has put pressure on all companies tied to the AI trade as investors weigh the costs of infrastructure against potential returns.

The broader market also saw significant movement during the late trading session on Friday. The SPDR S&P 500 ETF (SPY) dropped 1.77%, while the Invesco QQQ Trust ETF (QQQ) fell 3.47%. These figures reflect a cooling environment for the high-growth tech stocks that have driven the market recently.

Key participants and deals

Despite the lowered targets, several major investment groups are still expected to participate in the round. A group of investment firms from the United Arab Emirates, which includes the state-supported technology fund MGX, is anticipated to be the primary contributor. This partnership includes a specific provision where OpenAI would have an option to lease newly developed computing power in the region.

Other prominent firms are also planning to participate in the funding round. These include Founders Fund, Coatue, Sequoia Capital, and Andreessen Horowitz. Additionally, SoftBank is expected to be involved in the capital raise as the company seeks to secure the necessary resources for its continued expansion.

The company previously raised $122 billion in March, highlighting the massive amount of capital required to sustain its operations. The current recalibration suggests that while the demand for AI remains high, the pace at which companies can command premium valuations is becoming more complex for the leadership team to navigate.

Competition for capital

OpenAI is not the only major player navigating this difficult funding environment. Anthropic is currently preparing for an IPO next month with a potential valuation of $1.5 trillion or more. This creates a situation where investors may have to weigh the two primary AI companies against each other simultaneously.

Analysts suggest that Anthropic's fundraising needs could put the company in a difficult position as it competes for capital to fund its infrastructure. Dan Ives, a partner at Yorkville Ives, described the environment around Anthropic as a "perfect storm moment" because the company is so central to the AI revolution build out.

However, there are concerns about how the market will receive these high-valuation offerings. NYU Stern professor Aswath Damodaran noted that IPOs depend heavily on mood and momentum. He warned that the current environment could negatively impact Anthropic's initial reception as the market remains volatile.

Interconnected risks

The AI ecosystem is becoming increasingly intertwined, which creates a unique risk profile for investors. Damodaran described the relationship between Anthropic, OpenAI, and other parts of the AI ecosystem as being connected at the hip. He warned that if one of these major players falls, they could drag the others down with them.

This interconnectedness means that a downturn in one company can have a ripple effect across the entire sector. As investors look for stability, the high degree of correlation between these companies makes the market more sensitive to news regarding any single major player. This dynamic is a key factor for those watching the AI trade closely.

Moving forward, the success of these companies will likely depend on their ability to prove sustainable growth despite the cooling of the initial hype. With both OpenAI and Anthropic vying for dominance and capital, the next few months will be critical for determining which companies can maintain their momentum in a more disciplined investment climate.