On March 31, 2025, OpenAI officially declared the completion of its $40 billion funding round, resulting in a post-money valuation of $300 billion. Japan’s SoftBank Group spearheaded the round, with CEO Masayoshi Son‘s firm contributing $7.5 billion. Several notable existing backers also participated in this funding round.
Microsoft Corporation, a longstanding strategic partner that has previously invested billions in OpenAI, maintained its support during this round. Other participants included investment firms Coatue Management, Altimeter Capital Management, and Thrive Capital, all reinforcing their previous investments in the company.
This $40 billion funding represents the first phase of a larger capital commitment. Reports indicate that a second tranche of $30 billion will be invested in OpenAI by the end of 2025, consisting of $22.5 billion from SoftBank and $7.5 billion from a syndicate of investors.
Can reality catch up to OpenAI’s expectations?
OpenAI’s valuation stands on shaky ground, relying heavily on assumptions of rapid growth. At 75 times its expected 2025 revenue of $11.6 billion, its price-to-sales ratio surpasses even the most speculative tech valuations from the dotcom era, as predicted by experts. For comparison, Nvidia, a profitable semiconductor leader driving the AI revolution, trades at 30 times its sales.
This contrast becomes starker when factoring in OpenAI’s projected net loss of $5 billion for 2024, primarily due to $4 billion in annual computing costs and ongoing R&D expenses. Investors like SoftBank, which has contributed $7.5 billion to this round, expect EBITDA positivity by 2027 — a goal that requires nearly perfect execution in product adoption, cost efficiency, and global expansion.
The parallels to past tech bubbles are striking. Like WeWork at its peak, OpenAI’s valuation relies on the assumption of largely hypothetical market dominance. Its ambitious goal of reaching $100 billion in annual revenue by 2029 depends on capturing 63% of the generative AI market, a challenge given its current 11% global market share.
Market dynamics shift as competitors gain ground
OpenAI’s initial lead in the general-purpose AI sector diminishes as competitors carve out specialised areas. Anthropic’s Claude 4 performs on par with GPT-5 in enterprise evaluations while operating at 40% lower costs, challenging OpenAI’s premium pricing strategy.
Elon Musk’s xAI is gaining momentum in the scientific field through Grok-3’s peer-reviewed research contributions. At the same time, Meta’s open-source LLaMA models have cultivated a vibrant developer community of 400,000 individuals that could democratise AI innovation.
In China, state-backed corporations leverage local advantages to create formidable barriers. Tencent’s subsidised “Cloud Brain” clusters provide computing rates 60% lower than OpenAI’s Azure infrastructure, while Alibaba’s Qwen2-72B model leads in Mandarin-language applications through its strong integration with Alipay and Taobao.
What about valuation?
To justify its $300 billion valuation, OpenAI must achieve exceptional commercial success or groundbreaking scientific advancements, carrying significant risks. The $100 billion revenue goal assumes a dominant position in a fragmented market, requiring flawless execution in enterprise sales, consumer subscriptions, and API monetisation. However, gross margins remain constrained by soaring compute costs that escalate dramatically with increased model complexity.
In one realistic scenario, OpenAI could leverage Microsoft’s ecosystem to secure enterprise clients. By mandating GPT access through Azure and marketing AI-driven analytics tools, it might replicate Oracle’s 1990s dominance. With 89% of Fortune 500 companies already using ChatGPT Enterprise, this strategy offers stable revenue opportunities but risks antitrust actions.
This scenario envisions OpenAI struggling under competitive and financial pressures. If GPT-5 adoption falls short of expectations, projections suggest reaching 700 million daily users by 2026, which is unlikely. SoftBank could force leadership changes or asset sales. Combined with potential liabilities from AI-related lawsuits, this could trigger valuation declines exceeding 60%, reminiscent of Meta’s 2022 downturn.
