OpenAI targets $1.25 trillion valuation for $30 billion round

OpenAI is close to finalizing a $30 billion funding round that would value the company at $1.25 trillion, down from the initial $1.4 trillion target. The revised valuation represents a $150 billion decrease, yet the financing still remains in discussion with no confirmed details on the amount raised or price. OpenAI has not publicly announced an agreement or binding commitments for the round.

The proposed valuation is calculated pre-injection of capital, and raising the full $30 billion would result in an implied valuation of around $1.28 trillion after the investment. This would still surpass the $852 billion valuation from their March fundraising.

Investors involved in the negotiations include Coatue Management and funds based in the United Arab Emirates, while BlackRock is among the institutions approached. The company aims to secure investor commitments by the end of next week, with an October 30 deadline under consideration. The total raised could fall below $30 billion if investors do not subscribe for the full amount.

The funding comes amid increased scrutiny of AI companies' capital needs, particularly their commitments to expensive computing infrastructure and the extent to which revenue expansion can support those costs. The timing is significant as OpenAI prepares for a potential stock market flotation in 2027, providing additional funding before listing without exposing valuation to public market trading.

The proposed valuation implies a 47% increase over the March valuation, even after the reduction from the earlier target. This comparison involves different financing rounds and does not represent a realized gain for existing shareholders. OpenAI's expansion in commercial operations and computing capacity for training powerful models has made infrastructure a central discussion point with financial investors and technology partners.

A potential arrangement with UAE investors could involve additional computing capacity, though no final agreement has been disclosed.

Market conditions have added complexity, with technology shares under pressure following mixed earnings and questions about returns on AI spending. This has made pricing large private transactions more sensitive, especially for companies considering public listings. SoftBank Group, a major existing shareholder, recently increased its investment to $64.6 billion, representing approximately 13% ownership. SoftBank also repaid earlier bridge borrowings and canceled unused capacity as part of its financing.