OpenAI has cut its fundraising target from $30 billion to around $20 billion.
The valuation has also come down: it was previously touted at $1.4 trillion, but is now said to be $1.25 trillion. More painfully, the first closing may not even reach $20 billion. Reports say about $11 billion has been secured so far, and some major institutions have described the response with one word: “tepid.”
Who's backing the deal? A group of investors from the UAE, led by a tech fund with state backing, is also offering OpenAI the option to rent computing power at newly built local facilities. Several established venture capital firms are expected to join in, too. Later, they also plan to open the door to high-net-worth individuals investing at a $1.25 trillion valuation.
Why did things suddenly get tough? The timing couldn't be worse.
U.S. stocks have been punishing AI spending over the past two weeks. The Nasdaq fell 2.9% on Friday, and is now nearly 8% below its early-October high. Investors are watching big tech companies' cash flow turn negative while being asked, “Are you really going to pour another huge sum into model companies?” Naturally, they're pulling back. Anthropic is also about to go public, and the two companies are competing for the same pool of money.
I don't think this means OpenAI is struggling. The market is just starting to bargain. Last year, it was “get in first and ask questions later”; now it's “prove you'll get this money back first.”
The message for public markets is pretty clear, too: the AI trade isn't dead, but its valuation premium is gradually being squeezed out. Going forward, whoever can show real revenue will take less flak.
The above is for informational purposes only and does not constitute investment advice.
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