OpenAI reportedly seeking $6.5B investment at $150B valuation

OpenAI is seeking to raise $6.5 billion from investors at a $150 billion pre-money valuation, Bloomberg reported today.

The report comes about two weeks after rumors first emerged that the ChatGPT developer is in talks for a new multibillion-dollar funding round. At the time, sources told CNBC that OpenAI was eyeing a valuation of “more than $100 billion” but didn’t share a specific number.

Until now, there was also no word on the precise sum that the company hopes to raise. But one late August report did specify that Thrive Capital plans to lead the investment with a $1 billion contribution. Earlier this year, the venture capital firm bought shares from existing OpenAI investors at a $86 billion valuation.

It’s believed that Microsoft is also set to participate in the round. The company has so far provided OpenAI with about $13 billion worth of capital and cloud credits to support its artificial intelligence research. Nvidia Corp. and Apple Inc., which recently inked a product partnership with OpenAI, may participate as well.

The steep valuation at which the company is raising capital hints at investor confidence about its next-generation large language model. Reportedly known as Strawberry, the model is expected to become available within two weeks. It’s believed to possess more advanced reasoning capabilities than GPT-4o that will make it better at tasks such as solving math problems and generating code.

Strawberry reportedly takes significantly longer than other LLMs to answer questions. That suggests it may also require more hardware resources, which could increase OpenAI’s inference costs after the model launches. The capital that OpenAI hopes to raise may help it more easily shoulder the additional expenses.

After launching Strawberry, OpenAI will presumably move on to developing new, even more capable models. Such future development initiatives would further increase the company’s hardware expenses.

In an internal note that leaked last month, OpenAI OpenAI Chief Financial Officer Sarah Friar told employees that a part of the new funding will go towards buying compute infrastructure. The memo didn’t specify how the company would go about sourcing that infrastructure. In March, The Information reported that OpenAI is working with Microsoft to build a cloud-based AI supercomputer with millions of chips. 

Alongside the $6.5 billion funding round it’s rumored to be raising, OpenAI is reportedly seeking a $5 billion revolving credit facility from banks. According to Bloomberg, several major tech firms secured such credit before going public. In some cases, the financial institutions from which those companies raised the financing went on to underwrite their initial public offerings.

It’s unclear whether OpenAI has plans for an IPO, which would be one of the few ways its investors could realize a return on their stakes. The company currently has an unusual corporate structure that may complicate a stock market listing. OpenAI launched in 2015 as a nonprofit and later established a for-profit arm, which both leads its AI development efforts and issues shares to investors.

Sources told the Financial Times last month that the company is considering changing its corporate structure. OpenAI could reportedly remove caps that currently limit its investors’ maximum return. It’s unclear if the company is also considering other changes that might simplify its path to an eventual IPO.

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