Author: Li Jia Source: Wall Street News

OpenAI is finalizing a new round of financing that could raise $100 billion, valuing the company at $830 billion.

According to The Information, citing people familiar with the matter, SoftBank is expected to lead this round of investment, with an investment amount of US$30 billion. The funds will be divided into three tranches of US$10 billion each within the year. Amazon, which provides cloud services for OpenAI, could invest up to $50 billion, Nvidia, a supplier of OpenAI model chips, could invest up to $30 billion, and long-time partner Microsoft could invest roughly a few billion dollars.

The investments are expected to help the company reach its $100 billion funding goal, meaning additional investment from venture capital funds and other financial institutions could push the total round above that figure. However, according to The Information, citing another person familiar with the matter, it is unclear whether the strategic investors will provide additional funds and relevant negotiations are still ongoing.

According to The Information, citing people familiar with the matter, OpenAI is still seeking support from financial investors after receiving its first investment commitments. OpenAI executives have been in communication with existing investors Thrive Capital, Khosla Ventures, Founders Fund and Sequoia Capital, among others, about the funding round, one of the people said. It is unclear whether these investors will invest additional money and how much they will invest.

According to the report, two people familiar with the matter also revealed that investors participating in OpenAI’s latest round of financing (which OpenAI calls “Series C financing”) will receive preferred shares, which will be converted into Class A common shares when the company exits (such as a public offering). People familiar with the matter also said investors will receive a 1x liquidation preference, a typical deal provision designed to ensure investors get at least their full investment back if the company is sold.

First financing after restructuring paves the way for IPO

This round of financing is OpenAI’s first since the corporate reform last fall. The reform enables the company to issue standard equity shares and is a key step on its path to an IPO. Company executives have discussed listing the company as early as the fourth quarter, according to a person familiar with the matter.

Prior to this round, OpenAI had raised approximately $61 billion from investors including Microsoft, Thrive and SoftBank. Last fall, the company sold shares held by employees and other shareholders at a valuation of $500 billion.

Huge financing to cope with astronomical expenses

OpenAI launched this huge financing in anticipation of the soaring costs of AI operations and training. The company forecast last summer that the cost of running and training its artificial intelligence systems, as well as backup servers to support its growth, would reach about $450 billion between 2025 and 2030, according to media reports citing people familiar with the matter.

The $830 billion valuation in this round is a huge jump from last fall’s $500 billion valuation, as major investors continue to be enthusiastic about the AI pioneer even as the company faces huge spending pressures. The smooth progress of financing provides sufficient financial guarantee for OpenAI’s technology research and development and infrastructure expansion.