OpenAI raises $40 billion in a round led by SoftBank
This brings the company's valuation to a whopping $300 billion
Just five years ago, artificial intelligence was a niche topic for tech insiders. Today, AI powers everything from phones to workplaces. At the center of this shift is OpenAI, which rose to prominence with ChatGPT, now one of the world’s most widely used and talked-about AI tools.
Since its inception, OpenAI has made headlines not just for the capabilities of its chatbot but also for the staggering amount of money backing it. In 2023, Microsoft invested $10 billion in the company’s vision, not long after a previous $1 billion investment. That funding round pushed OpenAI’s valuation to $30 billion.
Now, just two years later, OpenAI is making headlines again. This time, for raising $40 billion, the largest funding round ever for a private tech company. Led by SoftBank, this deal pushes OpenAI’s valuation to $300 billion.
Acquah Nana Yeboah
The funding is split into two phases: $10 billion upfront, with $7.5 billion from SoftBank and $2.5 billion from a group of investors, while the remaining $30 billion is expected later this year. But there’s a catch: OpenAI must complete its shift to a fully for-profit company to secure the full amount.
Originally a non-profit, the company began this transition to meet soaring computing costs. CEO Sam Altman believes a for-profit model is needed to attract the necessary capital.
This new round follows a previous $6.6 billion raise, which nearly doubled OpenAI’s valuation from $86 billion to $157 billion. In just months, the company’s valuation nearly doubled again, reflecting investors’ optimism about AI’s future.
Despite this momentum, OpenAI isn’t profitable yet. It earned $3.7 billion in revenue last year but spent $5 billion. Its revenue is expected to hit $12.7 billion this year and $29.4 billion by 2026. But with spending at this scale, Sam Altman says OpenAI won’t be cash-flow positive until 2029, when it hopes to reach $125 billion in revenue.
If you zoom out and take a look at the industry, OpenAI’s story isn’t unique, as rival AI companies are also running at a loss. Anthropic, for instance, burned through $5.6 billion last year while generating only $1 billion in revenue and doesn't expect to be profitable until 2027.
So, while all the money pouring into AI might be jaw-dropping, investors aren’t expecting quick returns. For now, OpenAI’s ChatGPT still leads the pack, with over 500 million weekly users. The real challenge isn't just staying ahead; it is to make bank after these investments.
Emmanuel Oyedeji
