OpenAI is reportedly pursuing one of the largest fundraising rounds in startup history, targeting up to $100 billion in new capital that could juice value of the artificial intelligence (AI) startup to $830 billion, marking a dramatic escalation from the $500 billion valuation reported in October. The move comes as the AI sector faces mounting questions about inflated valuations and circular investment patterns, even as major backers like SoftBank Group scramble to fulfill massive funding commitments.
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OpenAI aims to complete the round by the end of the first quarter at the earliest, though terms remain fluid and investor demand at such levels remains uncertain, the Wall Street Journal reported on Thursday. The company is expected to recruit sovereign-wealth funds to participate, having previously secured backing from United Arab Emirates-based MGX. Disney has committed $1 billion while SoftBank earlier this year agreed to invest $30 billion.
SoftBank is racing to deliver the remaining $22.5 billion of its OpenAI funding commitment by year-end, Reuters reported on Friday.The Japanese conglomerate has already sold its entire $5.8 billion stake in Nvidia Corp. and offloaded $4.8 billion of T-Mobile U.S. shares to finance the bet. CEO Masayoshi Son is also considering tapping $11.5 billion in undrawn margin loans borrowed against SoftBank’s ownership in chip designer Arm Holdings.
The fundraising push unfolds against a backdrop of cooling enthusiasm for AI investments among public market investors, with OpenAI partners Oracle Corp. and CoreWeave, Inc. seeing market values decline as concerns mount about financing headwinds for massive data center buildouts.
Ambitious Funding Target Tests Market Appetite
OpenAI's latest funding effort represents a significant test of investor confidence in generative AI after months of waning public market enthusiasm. The $830 billion valuation--up 66% from OpenAI’s latest $500 billion valuation-- would make OpenAI one of the world’s most valuable entities, rivaling established tech giants.
The Information and Bloomberg reported Wednesday that OpenAI had been exploring a funding round of up to $100 billion at around $750 billion valuation, with Amazon.com Inc. in early-stage discussions to invest at least $10 billion. The higher valuation reported by the Journal reflects the rapidly evolving nature of the company's fundraising efforts.
OpenAI requires massive capital to build AI models and maintain competitiveness as Alphabet Inc.'s Google intensifies its challenge. CEO Sam Altman recently issued a "code red" to accelerate development and counter Google's Gemini momentum. While OpenAI is projected to burn more than $200 billion in cash through 2030, Google benefits from low debt levels and robust profits that could enable heavier AI investment.
OpenAI faces skepticism over computing deals worth hundreds of billions of dollars. Altman said in October that the company aims to build 30 gigawatts of computing capacity for $1.4 trillion, with each gigawatt currently carrying a capital cost exceeding $40 billion.
SoftBank Mobilizes Multiple Funding Sources
SoftBank's efforts to complete its OpenAI commitment highlight the strain even major dealmakers face financing ambitious AI projects. Beyond asset sales, Reuters noted the company has multiple capital sources available, including margin loans, balance sheet cash of 4.2 trillion yen ($27.16 billion) as of September 30, and remaining holdings including a 4% stake in T-Mobile U.S. worth of $11 billioin as of the end of September, according to LSEG data.
Son has strong incentives to fulfill the obligations quickly. SoftBank secured its OpenAI investment at a $300 billion valuation in April. With OpenAI now seeking capital at nearly three times that level, SoftBank stands to realize significant paper gains once the transaction completes.
The Japanese conglomerate is also pursuing other cash-raising measures. Its payments app PayPay, which was expected to go public this month, now targets a first-quarter IPO likely to raise more than $20 billion. SoftBank is additionally looking to cash out holdings in Didi Global as the Chinese ride-hailing company prepares to list shares in Hong Kong.
Son has slowed most other Vision Fund dealmaking to a crawl, with any transaction above $50 million now requiring his explicit approval, according to Reuters sources.
Mounting Concerns Over AI Bubble and Circular Investments
The fundraising efforts occur as concerns intensify about an AI bubble and circular investment patterns that may obscure underlying risks. OpenAI's ecosystem has felt the chill; partners such as Oracle and CoreWeave have seen market values dip as investors sour on financing headwinds facing large-scale datacenter buildouts.
Amazon's potential investment would represent another circular transaction, where cloud providers invest in AI companies that commit to using their datacenters and chips. OpenAI previously invested $350 million in CoreWeave, which used funds to buy chips from its backer Nvidia, according to media reports.
Big techs including Meta Platforms have committed unprecedented sums to datacenter buildouts requiring chips, power, cooling and servers, prompting concerns about returns if investments fail to deliver commensurate profits. Both OpenAI and SoftBank are investors in Stargate, a $500 billion initiative to build AI data centers that executives describe as crucial to U.S. ambitions to maintain AI leadership over China.
The success of OpenAI's round will likely hinge on whether Altman can convince institutional investors that long-term returns from ever-scaling AI justify a valuation rivaling the world's most valuable companies. Terms could still change, and whether sufficient investor demand exists to reach the $100 billion goal remains unclear.
