OpenAI cuts its funding round target to $20 billion as investors question AI spending
OpenAI is now seeking to raise up to $20 billion in its latest funding round, down from an earlier target of about $30 billion, CNBC confirmed on Saturday after the Financial Times first reported the cut. The FT said the round would value the ChatGPT developer at $1.25 trillion including the new money. The round has not closed, and the figures could change.
What changed: The FT reported that OpenAI cut its target by $10 billion and set a Friday deadline for investors to commit, with some investors choosing to reduce their allocations, CNBC reported. A person directly familiar with the deal told CNBC that the round is still in progress. OpenAI did not immediately respond to CNBC’s request for comment.
Who is investing: Investors from the United Arab Emirates are leading the round alongside the investment firm Coatue, CNBC reported.
Why now: The smaller target follows a week in which investors questioned whether big tech companies’ spending on AI data centers and chips will pay off. On Friday, Intel fell 25% on weak revenue guidance, Micron fell 5.5% and Nvidia fell 4%, CNBC reported. Microsoft, Alphabet’s Google and Amazon all issued capital spending figures or forecasts last week that came in below analysts’ estimates, and Alphabet had its worst trading day ever on Thursday after its search revenue missed expectations.
What it means: A valuation in a private funding round is the price investors agree to pay for new shares, not a price set by public trading. The final size and terms of OpenAI’s round will not be known until it closes.