| OpenAI raises record $40 billion — don’t call it a bubble |
 Source: OpenAI |
| OpenAI on Monday announced the closure of a record $40 billion funding round — the largest private tech funding round on record (by quite a large margin) — that valued the company at $300 billion, nearly double its previous valuation of $157 billion. |
| It comes at a rather inauspicious moment, when the valuations of publicly-traded AI-related companies have been in full retreat through the first quarter as investor sentiment toward the Magnificant Seven has, rather violently, shifted. |
| Here’s everything we know about the round: Fitting for a company with as strange a history as OpenAI, the terms of the fundraise are complicated. |
| The round will be led by Japan’s SoftBank, which will be contributing $30 billion. Microsoft and Thrive Capital are also joining in, at unknown amounts. OpenAI, however, isn’t going to get it all at once. The initial funding — to be received in the next two weeks, according to SoftBank — will be $10 billion, while the remaining $30 billion will come by the end of 2025. |
| SoftBank, however, added in a disclosure that its full $30 billion commitment is fully contingent upon OpenAI converting to a for-profit organization by the end of 2025. If it does not do so, SoftBank said it could slash its investment to just $10 billion. |
| The terms are similar to those attached to the $6.6 billion funding round OpenAI secured as recently as October, 2024, a round that required OpenAI’s transition to a for-profit within two years, or investors can ask for their money back. |
| SoftBank said it plans to finance the initial $10 billion investment through borrowings from banks and other financial institutions. SoftBank reported a net loss of $2.4 billion for the quarter ending Dec. 31. |
| This is all in addition to the $2.2 billion SoftBank has already invested in OpenAI beginning in September of last year. See, OpenAI is SoftBank’s “most important partner.” As SoftBank notes, the reasoning here hinges entirely on the advancement of artificial general, and then super, intelligence, two hypothetical, scientifically dubious pursuits whose potential existence has no grounding in evidence-based science. |
| It’s also an addition to Project Stargate, the $500 billion U.S.-based data center buildout project that will be fronted by OpenAI and SoftBank. To that end, $18 billion of this $40 billion funding round will be going toward OpenAI’s Stargate commitments, according to CNBC. |
| The business: OpenAI reportedly has 20 million paying subscribers and 500 million ChatGPT users, though its method of measuring active users is quite unclear. Either way, fewer than 5% of its total subscription base is monetized. |
| As I mentioned yesterday, this round places OpenAI among the largest companies in the world by valuation, with a noticeable difference in that OpenAI is operating a money-losing business at a wildly extreme scale. For example, both Verizon and AT&T have market caps of right around $200 billion, meaning OpenAI is now valued far above both of these companies. But both earned more than $120 billion in revenue last year, and both reported earnings above $2 per share. |
| OpenAI, meanwhile — which lost $5 billion in 2024 on $4 billion in revenue — expects to burn a total of $44 billion between 2023 and 2028, before finally making a $14 billion profit in 2029, according to The Information. And that’s if all goes well. That profitability projection is based on an assumption that the company will generate more than $100 billion in revenue that year. |
| The landscape: Beyond the challenging landscape of the public tech sector, OpenAI is actively facing a lawsuit from one Elon Musk over the very question of its pending conversion to a for-profit enterprise. A judge recently agreed to expedite a trial to Fall of 2025, the timing of which makes OpenAI’s planned conversion … interesting. |
| OpenAI did not return a request for comment on the above. |
| Then, in the midst of all of this, there’s DeepSeek and the rise of open-source generative AI. According to The Information, a number of larger enterprises, including Palo Alto Networks, are planning to spend less on GenAI from providers like OpenAI, since models from DeepSeek can “handle the same tasks for just 5% of the cost of the OpenAI models.” This coincides, of course, with ongoing challenges in securing enterprise adoption due to concerns of privacy, security, reliability and bias. |
| In recognition of this shifting dynamic, CEO Sam Altman said recently that OpenAI plans to release an open-weights model “in the coming months.” |
| Much of the current environment — wildly high, speculative valuations based on technological optimism — seems to mirror the dot-com bubble of the early 2000s. |
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| OpenAI does not seem to be comfortably operational. In October, it secured $6 billion in funding and another $4 billion in debt; just a few short months later, despite all the supposed user growth, it’s getting another $10 billion injection with another $30 billion on the way. |
| And in recent days, Altman has posted multiple times about the “biblical demand” OpenAI’s been experiencing in light of its copyright-questionable Studio Ghibli viral trend, saying that “our GPUs are melting.” |
| Altman said Tuesday that “we are getting things under control, but you should expect new releases from OpenAI to be delayed, stuff to break and for service to sometimes be slow as we deal with capacity challenges.” |
| The fresh funding round seems like it was vitally needed, which is wildly demonstrative of just how much of a cash burn this business is. |
| Taking the time to respond to a user who highlighted OpenAI’s flawed business model, Altman wrote: “as a business we are doing really great but thanks for your concern.” |
| There are two sides to this field. Tools and gods. |
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