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OpenAI to raise $6.5B investment at $150B valuation: Report

OpenAI unveils GPT-4o: A new era of multimodal AI that can hear and respond
Picture Credits: Depositphotos

Reports of OpenAI’s $6.5B investment talks at $150B valuation have been circulating over the last few days ahead of Strawberry launch.

OpenAI is reportedly in talks to raise $6.5B from investors at a pre-money valuation of $150B, according to a Bloomberg report. This news follows earlier rumours from mid-August that the ChatGPT developer was aiming for a new funding round with a valuation exceeding $100B. However, the specific amount it sought to raise was undisclosed until now.

Thrive Capital, which had previously purchased OpenAI shares at an $86B valuation, is expected to lead the round with a $1B contribution. Microsoft, which has already invested approximately $13B in OpenAI, is also believed to be participating. Additionally, Nvidia and Apple—who recently formed a product partnership with OpenAI—may join the investment round.

Strawberry brings investor confidence in OpenAI’s search for $6.5B investment

The high valuation suggests strong investor confidence in OpenAI’s upcoming large language model, reportedly called “Strawberry.” Set to launch soon, this next-generation model is expected to have more advanced reasoning capabilities than GPT-4o, with improvements in tasks like solving complex math problems and generating code. However, Strawberry’s slower response time and higher hardware resource requirements could drive up OpenAI’s operating costs.

The new capital that OpenAI is raising is likely intended to cover these increased expenses, particularly as the company develops future models, which will further increase its hardware needs.

Investment Plans and Infrastructure Expansion

A portion of the funds will be allocated to acquiring compute infrastructure, as mentioned by OpenAI’s Chief Financial Officer, Sarah Friar, in a leaked internal memo. Earlier this year, it was reported that OpenAI is working with Microsoft to build an AI supercomputer in the cloud using millions of chips, which would support OpenAI’s growing computational demands.

In addition to the $6.5B investment, OpenAI is also reportedly seeking a $5B revolving credit facility from banks. Tech firms commonly secure such facilities ahead of initial public offerings (IPOs). While there’s no confirmation of an IPO, OpenAI’s complex corporate structure—initially founded as a nonprofit and later adding a for-profit arm—could present challenges for a stock market listing.

Potential Corporate Structure Changes

OpenAI is rumoured to be considering changes to its corporate structure, including removing caps that limit investor returns, which could pave the way for an eventual IPO. However, it remains unclear what other structural adjustments the company might pursue to simplify a public offering and deliver returns to its investors.

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