OpenAI's Latest Funding Round Set to Exceed $150 Billion Valuation
with Backing from Nvidia, Apple, and Microsoft
OpenAI, the groundbreaking AI company behind ChatGPT, raised a new funding round that could value the company at $157 billion, the largest venture capital raise in history. The investment was led by Thrive Capital and included major players like Microsoft and Nvidia. OpenAI aims to use these funds to accelerate AI research, expand compute capacity, and develop advanced AI tools. Despite rapid revenue growth projections—$3.7 billion for 2024—OpenAI expects a $5 billion net loss this year, signaling a heavy investment phase focused on growth.
OpenAI also communicated to have access to a $4 billion credit lines from banks giving it access to more than $10 billion war chest. It is remarkable that banks and European banks are actually lending money to a company with these level of current losses.
Expected Use of Proceeds from Latest Funding Round
OpenAI wants to build the world’s leading generative AI technology, which requires to build models and train them, which is very expensive.
OpenAI plans to utilize the $6.6 billion from the recent funding round to further its AI research, particularly in frontier technologies. Significant resources will be allocated to expanding compute capacity, a critical need for training large language models. Additionally, OpenAI intends to explore custom AI hardware, potentially through partnerships with chipmakers. These investments will support the development of new AI tools and applications, aiming to solidify its leadership in the rapidly growing AI ecosystem.
OpenAI, Italian state lender CDP team up for AI use in startups
OpenAI and Italy's state lender CDP have signed a memorandum of understanding to support the take up of artificial intelligence (AI) by Italian startups and innovative firms.
In a joint statement on Wednesday, the two companies said the ChatGPT maker would invest directly and indirectly in start-ups developing AI-based products or services through the venture capital arm of CDP.
The agreement should give Italian companies access to OpenAI's advanced technologies and funding from U.S. venture capitalists, the statement added.
Comparison with U.S. AI Startups
OpenAI's funding round dwarfs recent raises by other U.S. AI companies. For instance, Anthropic, a key competitor, is reportedly aiming to raise capital at a $40 billion valuation—less than a third of OpenAI’s valuation. This disparity reflects OpenAI’s aggressive expansion into enterprise AI services and custom AI hardware, positioning it far ahead of peers in terms of both scale and investment.
Previous Funding Rounds at OpenAi
OpenAI's latest $6.6 billion round follows a series of major investments in recent years. In 2023, it secured $10 billion from Microsoft, which played a pivotal role in its early commercialization through integrating OpenAI's models into Microsoft's products. Earlier, OpenAI raised $1 billion from Microsoft in 2019, when it shifted from a non-profit to a for-profit model. These rounds, combined with strategic partnerships, have allowed OpenAI to scale rapidly, positioning itself as a leader in AI research and commercialization.
The Role of Strategic Investors: Nvidia, Apple, and Microsoft
OpenAI’s growth is underpinned by some of the most influential investors in tech. Microsoft, its largest backer, has not only invested capital but also integrated OpenAI’s technologies across its product suite, giving it commercial traction. Nvidia, another strategic investor, supports OpenAI’s AI infrastructure needs through its GPUs. Additional prominent investors include Thrive Capital and Andreessen Horowitz, both of whom have deep expertise in scaling tech companies. These investors bring both financial support and strategic resources that further bolster OpenAI's leadership in AI innovation
Nvidia's Role: As the world’s leading chipmaker, Nvidia's involvement further emphasizes the importance of its AI hardware to companies like OpenAI. Nvidia has reportedly discussed investing approximately $100 million, which comes at a time when its quarterly revenue has soared to $30 billion. Nvidia's AI accelerators are critical to developing and running models like ChatGPT.
Microsoft's Deep Investment: Already OpenAI's largest investor, Microsoft has invested $13 billion into the startup. OpenAI’s services are deeply integrated into Microsoft's Windows and Copilot AI platforms, reflecting the symbiotic relationship between the two companies.
Apple’s AI Ambitions: Apple is relatively new to AI but uses OpenAI's models to develop its AI suite, Apple Intelligence. Although the company has shown interest in taking a seat on OpenAI's board, those plans were dropped in July.
The Growing Importance of AI to Tech Giants
The interest of Nvidia, Apple, and Microsoft underscores OpenAI’s growing influence across the tech industry. As AI continues to redefine product development and consumer engagement, each of these companies sees the potential to enhance their portfolios:
Nvidia’s Chip Dominance: With a significant portion of AI hardware production, Nvidia has profited from the AI boom, leading to record earnings. Investing in OpenAI strengthens ties with a key AI client and ensures its position in future AI advancements.
Microsoft’s Long-Term Bet: Microsoft’s significant stake in OpenAI highlights its belief in AI's potential to fuel growth across its product range, including cloud services, productivity tools, and AI-enhanced software platforms.
Apple’s Entry: With Apple's slower initial engagement in AI, integrating OpenAI’s technology into the iPhone operating system could position it as a future leader in consumer-focused AI applications.
Industry Impact and Regulatory Scrutiny
Regulators have not ignored these tech giants' growing presence in the AI space. The European Union and the US have raised concerns about Nvidia's dominance in AI chips and Microsoft's close integration with OpenAI. As OpenAI grows and attracts investment from major tech players, scrutiny will likely increase, particularly around competition and market fairness.
OpenAI's Path Forward
The profitability of OpenAI will come from businesses using their products and services, to use them in different parts of their workflow. They passed 1 million business users of ChatGPT, but there is a long way to go to justify the valuation. Investors will have to wait to see their investment going up and become liquid.
Conclusion
OpenAI's upcoming funding round is not just a financial milestone; it signals the critical role AI will play in the future of technology. With Nvidia, Apple, and Microsoft aligning themselves with OpenAI, the company is poised to continue pushing the boundaries of artificial intelligence, even as regulatory scrutiny increases. Investors and tech firms recognize AI's transformative potential, marking OpenAI as a key player in this rapidly evolving landscape.
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