OpenAI cuts valuation target to $1.25 trillion in $30 billion round

What this is about

According to reports from the Financial Times (FT), CNBC and Bloomberg, OpenAI is close to a new funding round of up to $30 billion. To get there, the company has lowered its valuation target: it originally pitched investors on $1.4 trillion, citing internal documents reported by the FT, and the target is now $1.25 trillion – $150 billion less. Talks are in their final stage, and details may still change, according to those involved. The reports rely on anonymous sources and have not been officially confirmed.

Weaker demand

According to the FT, demand was lower than in earlier rounds. Some backers were suffering from "saturation" after heavy investments in previous rounds. The valuation is the total value that a company and its investors agree on in a funding round; it determines how many shares the new money buys.

Who is investing, and why

Investors from the United Arab Emirates and the investment firm Coatue are leading the round. It is being positioned as a bridge ahead of a possible IPO. At the same time, OpenAI is negotiating a commercial deal via the UAE to secure additional computing capacity, according to CNBC.

Background: the road to the stock market

OpenAI confidentially filed an IPO prospectus with the US Securities and Exchange Commission (SEC) in June. CFO Sarah Friar told employees in August that OpenAI would be publicly listed in 2027. CEO Sam Altman said in September that the current moment was a bad time for an IPO. Anthropic is also preparing an IPO and is aiming for $1.5 to $2 trillion.

Earlier, in March, OpenAI raised $122 billion at a valuation of $852 billion, according to aktien.news. In September, reports said investors had proposed a valuation of $1.2 trillion. According to a February report, analysts expected OpenAI to remain unprofitable until at least 2029, despite sharply rising revenue forecasts.

Our take

The cut is small compared with the jump since March ($852 billion to $1.25 trillion), but it shows that even OpenAI has to haggle over price. The lofty valuations rest on future expectations, not profits. Retail investors can't trade OpenAI directly; the signal matters more for the AI sector as a whole. Still open are the final closing, the terms and the IPO date, on which Friar's and Altman's statements differ.