Key Takeaways:
SoftBank Group Corp. plans to invest $500 million in OpenAI as part of a forthcoming funding round, The Information reported today.
The cash infusion will give the ChatGPT developer a pre-money valuation of $150 billion, significantly up from the $86 billion valuation after a tender offer earlier this year.
Is it me or is Sam Altman now holding the whole Ai hype industry hostage?
Feed capital into my cash-burning frankenstein or OpenAI goes belly up and all our stocks go down in flames together.
— Nobody Special (@JG_Nuke) September 30, 2024
The funding round, expected to be worth up to $6.5 billion, has been anticipated for months and is likely to close within a week.
It is believed that OpenAI will receive the capital in the form of convertible notes, a debt mechanism allowing lenders to convert their investments into equity later.
Incredible maybe. For sure predictable.
— Ryan Floyd 🇺🇸 (@RyanFloyd) September 30, 2024
This new funding will provide OpenAI with substantial resources to continue its rapid growth and development of AI technologies like ChatGPT.
The investment from SoftBank could also foster product development collaboration between the two companies. SoftBank, which recently acquired chip startup Graphcore Ltd. and holds a majority stake in Arm Holdings plc, is keen on leveraging its semiconductor assets to enter the AI processor market.
If Son didn’t take the bait on the worst possible investment opportunity known to men, he would literally be punished by the gods. Just drop dead or something. It’s his destiny to burn as much wealth as possible in creative, truly insane ways.
— uhh (@dualmotkany) September 30, 2024
OpenAI, meanwhile, is reportedly in discussions to partner with a chipmaker to design a custom AI accelerator for its machine learning clusters.
Apart from SoftBank, Microsoft Corp. is also expected to participate in this funding round. Microsoft, which previously invested about $13 billion in OpenAI, could increase its stake by another $1 billion, further cementing its pivotal role in OpenAI’s growth.
So OpenAI is cooked
— Curtis Wenis (@CurtisWenis) September 30, 2024
Other anticipated participants in the round include Tiger Global, Coatue, and Thrive Capital. Thrive Capital is poised to lead the round with an investment exceeding $1 billion and may also have an option to invest an additional $1 billion at the same valuation next year. Nvidia Corp. is reportedly considering joining the round as well.
Apple Inc., which was expected to be part of this round, has exited unexpectedly, according to a report by the Wall Street Journal.
RIP OpenAI
— Joshua Schoenaker (@JoshSchoen) September 30, 2024
Apple, which previously had an observer seat on OpenAI’s board, has chosen not to participate in this funding round. The reasons for Apple’s withdrawal remain unclear, and it is uncertain if this will impact their product partnership with OpenAI.
This partnership includes upcoming iOS features under the “Apple Intelligence” umbrella, which would allow Siri to integrate ChatGPT to answer user queries.
what happened to making bold bets on underdog companies
— Techguyver (@techguyver) September 30, 2024
A report by Reuters suggested that OpenAI’s ability to secure a $150 billion pre-money valuation may depend on changes to its organizational structure.
OpenAI currently operates as a nonprofit, and its AI development initiatives are driven by a for-profit arm created in 2019.
This is replacing Apple investment!
— Uri Eliabayev (@urieli17) September 30, 2024
The company reportedly plans to restructure this for-profit arm as a benefit corporation and remove caps on investor returns, which could make the deal more attractive to participants in this latest funding round.
The fundraising comes at a time of surging demand for OpenAI’s models. The company expects to close in 2024 with $3.7 billion in revenue, and forecasts show this number rising sharply to $11.6 billion by 2025 and potentially reaching $100 billion by 2029.
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