Historic funding round values OpenAI at $157 billion

OpenAI, the company behind ChatGPT, secured $6.6 billion in new funding, propelling its valuation to $157 billion and cementing its position as the world leader in artificial intelligence.

The landmark investment, one of Silicon Valley’s largest, was announced by OpenAI on Wednesday.

Founded in 2015 and led by Sam Altman, OpenAI plans to use the funds to advance its AI research, increase computing capacity, and develop tools for solving complex problems.

Thrive Capital led the funding round, with participation from SoftBank, Microsoft, Nvidia, Tiger Global, and MGX, an investment firm controlled by the United Arab Emirates.

Apple, which uses OpenAI models in its generative AI offerings, withdrew from negotiations on participating in the funding.

This investment makes OpenAI the third-largest venture-backed company globally, behind SpaceX and ByteDance.

The company gained prominence in 2022 with the release of ChatGPT, one of the fastest-downloaded apps ever, showcasing the power of generative AI to produce human-like content from simple prompts.

OpenAI followed this with GPT-4, the large language model powering ChatGPT, and numerous other AI applications.

The new funding is expected to support the development of GPT-4’s successor and accelerate the release of Sora, a tool for creating videos from text commands.

The tech industry views generative AI as a transformative innovation, comparable to PCs or smartphones, with potential to dramatically increase productivity.

Major tech companies like Google, Microsoft, Meta, Amazon, and Apple are heavily investing in generative AI to avoid falling behind.

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The frenzy has helped drive Wall Street to record levels, turning Nvidia, which provides crucial components for AI training, into one of the world’s biggest companies.

According to the Financial Times, OpenAI imposed a condition of exclusivity on investors, barring them from investing in rival AI startups, such as Anthropic or Elon Musk’s xAI.

OpenAI aims to maintain rapid growth despite significant costs for computing power and talent acquisition.

The company has expanded its workforce to 1,700 employees from 700 in just nine months and is projected to lose $5 billion in 2024, with estimated sales of $3.7 billion this year, according to the New York Times.

The cash injection comes at a tumultuous time for OpenAI, with the recent departures by key executives.

Altman’s role inside the company has also grown, less than a year after he was briefly fired by the OpenAI board over his management style and for pushing out new products too quickly.

The coup against Altman only lasted a few days after employees rebelled and Microsoft, the company’s biggest investor, orchestrated his return.

The executives and board members who played roles in his exit have since left the company.

Reports said the investors demanded a reorganization of the company that would make it an official “for profit” firm more typical of Silicon Valley startups and confirm Altman’s authority.

OpenAI, since its founding in 2015, has been organized as a non-profit, with a board that did not answer to investors and a money making arm run separately.

Altman is also reported to be getting equity in OpenAI, which would likely make him a multi-billionaire, though he has denied the reports.

The company also faces a lawsuit from Elon Musk, an original investor, who claims OpenAI has deviated from its initial non-profit mission since he stepped away in 2018.