Apple Pulls Plug on OpenAI Investment Amidst Turbulence as Microsoft and NVIDIA Stay in the Game
1min read Amidst the reported internal upheaval at OpenAI due to executive departures and plans to transition to a profit-driven model, Apple has withdrawn from funding negotiations with the AI giant.
OpenAI had planned to raise about $6.5 billion in a current funding round, but Apple’s unexpected exit has introduced uncertainty. Reports indicate that Microsoft and NVIDIA continue to engage in talks, with Microsoft poised to increase its investment by around $1 billion, following its previous $13 billion contribution.
Apple’s initial enthusiasm for OpenAI was evident during this year’s WWDC, where a partnership was announced to incorporate ChatGPT into future Apple operating systems. However, Apple’s withdrawal marks a shift in its investment strategy at a time when OpenAI aims for a $150 billion valuation, potentially positioning it among the highest-valued tech companies historically.
The current investment round, structured through convertible debt, is vital for OpenAI’s plans to restructure and liberate itself from non-profit constraints. Should it fail to transition to a profit-making entity within two years, the funding will morph into debt, pressuring the firm further.
Despite anticipated revenues possibly surpassing the earlier projection of $1 billion for this year, operating costs, primarily from partnerships and infrastructure, weigh heavily, with losses expected to reach $5 billion. This financial pressure implies that OpenAI might need another capital infusion next year.
OpenAI’s revenue model, significantly derived from corporate services and chatbot subscriptions, shows robust growth. However, sustaining and expanding these operations demands significant resources, underscoring the needs for continuous funding. The evolving financial landscape at OpenAI presents both a challenge and an opportunity for its investors.