OpenAI Cuts Funding Round to $20 Billion, Trims Valuation to $1.25 Trillion

OpenAI has cut the target of its current funding round by $10 billion to $20 billion (about €18 billion), according to The Financial Times. The ChatGPT maker has also lowered the valuation it seeks — from $1.4 trillion to $1.25 trillion (about €1.12 trillion), a discount of $150 billion.

The deadline for binding commitments passed on Friday, and the first close could even come in below the new $20 billion target, The FT reported. The reason: some investors have reduced the amounts they had planned to contribute, according to people familiar with the matter. One backer told the newspaper the process had started amid enthusiasm for AI stocks and was then caught out by the sharp reversal in the market.

The scaled-back round is a bridge until OpenAI can go public — a step the company has shelved for now.

Who is still investing?

The largest backer is expected to be a consortium from the United Arab Emirates that includes the state-backed tech fund MGX. In return, OpenAI gets the option to lease newly built computing capacity in the region.

The venture capital firms Founders Fund, Coatue, Sequoia Capital and Andreessen Horowitz, as well as Masayoshi Son's SoftBank, also plan to take part. After that, wealthy individuals are set to receive an offer to invest at the same valuation, which could still bring the round to about $20 billion, one person familiar with the matter said.

OpenAI, Sequoia, Founders Fund and SoftBank declined to comment to The FT; MGX, Coatue and Andreessen Horowitz did not immediately respond. The takeaway: even a reduced round depends heavily on Gulf state money and a secondary pull of private individuals.

How far the numbers have moved

Only in March, OpenAI raised $122 billion (about €110 billion) at a valuation of $852 billion, from investors including Amazon, SoftBank and Nvidia. The new $20 billion round is roughly one-sixth of that size — yet the company plans to spend many times the March sum on the computing power needed to train and run its models.

The company confidentially filed for a listing in June. In September, chief executive Sam Altman ruled out going public this year. "Given everything happening with safety, right now would be an ill-advised moment to go public," Mr. Altman said, according to TechCrunch. Chief financial officer Sarah Friar had already told employees in August that OpenAI would be a publicly traded company in 2027.

Why investors are getting nervous

The retreat comes as investors question the billions pouring into AI. On Friday, the tech-heavy Nasdaq slid after Alphabet, Amazon and Intel disappointed with their results. The Nasdaq Composite fell 2.9 percent, leaving it 7.8 percent below its record high from early October, according to The FT.

At OpenAI itself, the numbers raise questions. Its annualized revenue run rate was about $50 billion (about €45 billion) at the end of September, The FT and Reuters reported. Investors had previously been told $68 billion to $70 billion; the difference stems mainly from revenue through cloud partners that OpenAI does not fully book. At the same time, the company expects to burn a total of $278 billion (about €250 billion) in cash through 2030, The FT reported.

In plain terms: the company expects to burn more than five times its current annual revenue over the next five years — which is exactly why this round matters.

A problem for the entire supply chain

OpenAI raising less money affects far more than one company. A web of dependencies has formed around the ChatGPT maker:

• Oracle signed a contract worth about $300 billion with OpenAI and sits on net debt of about $132 billion.
• The cloud provider CoreWeave carries net debt of about $46 billion.
• Nvidia holds a stake of about $30 billion in OpenAI.

If OpenAI cannot finance the computing power it has ordered as planned, the entire supply chain will feel it. In early October, Oracle and CoreWeave dropped more than 5 percent and almost 8 percent in a single day as doubts about OpenAI's ability to pay surfaced.

There is also competition for the same money. OpenAI was keen to lock in commitments before Anthropic's IPO, expected in mid-November, The FT reported. The maker of the AI assistant Claude has published its prospectus and is set to be valued at $1.5 trillion or more. Both companies court the same large institutional investors, and the Anthropic listing is currently tying up both capital and attention.

What still works in OpenAI's favor

Even at $1.25 trillion, OpenAI would be the most valuable private company in history, and $20 billion is still one of the largest funding rounds ever. Growth remains strong, according to media reports: revenue rose 77 percent in the third quarter, and 107 percent in the enterprise business — though these figures are unaudited. OpenAI still expects a revenue run rate of $70 billion or more by the end of the year, media reports say.

Mr. Altman has stressed that the postponed IPO has little to do with market sentiment. The decisive factors, he said, are the debates over AI safety and whether society is ready for that step. Whether investors accept that framing — and fill the remaining gap — will show in the first close.