Weeks after billing its latest raise as the final chance to buy in before an initial public offering, OpenAI has been forced into a swift climbdown, cutting the round by a third in the face of weak investor appetite.
The desired valuation for OpenAI has slipped to $1.25 trillion from $1.4 trillion, while the ChatGPT maker is now chasing roughly $20 billion rather than the $30 billion it pursued last month, according to the Financial Times. Hitting even that lower figure may prove difficult, with the first close now expected to come in below $20 billion after several backers trimmed their allocations.
Commitments were due Friday, and about $11 billion has been locked in so far, the Wall Street Journal reported, with some large investors responding tepidly.
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Signs of fatigue predated the reset. When Morgan Stanley and tech fund Dragoneer took OpenAI to private wealth clients at a $1.4 trillion pre-money valuation, interest lagged well behind earlier rounds. Backers that have already written large cheques across successive raises are now hesitant to commit more.
Market conditions have soured fast. Down 2.9% on Friday, the Nasdaq now trades 7.8% below the record close it set on Oct. 6, as doubts mount over the sheer scale of AI spending and whether the returns will ever arrive.
Leading the round is a consortium of United Arab Emirates investors including state-backed fund MGX, an arrangement that would also give OpenAI an option to lease newly built computing capacity in the region. Founders Fund, Coatue, Sequoia Capital, Andreessen Horowitz and SoftBank are also expected to participate, and a later retail offering to wealthy individuals at the same $1.25 trillion valuation could push the total toward $20 billion.
Having closed a $122 billion round in March at an $852 billion valuation, OpenAI is racing to finish ahead of Anthropic, which filed publicly for an IPO on October 26 and is targeting a valuation $1.5 trillion or more.
