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OpenAI Bolsters War Chest with $40B Credit Amidst Soaring Valuation and Strategic Shifts
AInvestThursday, Oct 3, 2024 6:00 pm ET
1min read
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OpenAI has secured a new $40 billion revolving credit from multiple financial institutions, pushing its total liquidity to over $100 billion. This comes on the heels of a recent funding round where OpenAI was valued at $157 billion, raising $66 billion from leading investors and tech giants.

Institutions such as JPMorgan Chase, Citibank, Goldman Sachs, Morgan Stanley, Santander, Wells Fargo, Sumitomo Mitsui, UBS, and HSBC are involved in this credit arrangement. The unsecured loan, which includes a $20 billion add-on option, can be accessed over three years. OpenAI's borrowing rate is set at the Secured Overnight Financing Rate (SOFR) plus 100 basis points, estimated at around 6% considering a SOFR slightly above 5% early this week.

OpenAI plans to channel these funds into research, product development, infrastructure expansion, and talent acquisition. These financial maneuvers underscore OpenAI's intent to maintain its leading position in the competitive AI landscape.

The company's recent funding draw was led by Thrive Capital, with investment participation from major players such as Microsoft, Nvidia, SoftBank, Khosla Ventures, Altimeter Capital, Fidelity Management & Research, MGX, and Tiger Global Management. This influx of investment has significantly increased OpenAI's valuation compared to previous reports pegging it at $800 billion earlier this year.

Despite impressive revenue growth, with August incomes reported at $3 billion marking a 1700% increase, OpenAI faces high operational costs. Heavy investments in GPUs from Nvidia for AI model training and running contribute heavily, forecasting a $50 billion loss this year. Meanwhile, Microsoft stands as a critical partner, supporting OpenAI with substantial investments and leveraging its Azure cloud capabilities.

The company is also experiencing internal shifts, with key executives like CTO Mira Murati, research head Bob McGrew, and VP Barret Zoph recently departing. An internal meeting suggested potential restructuring toward becoming a for-profit entity, though CEO Altman denied receiving a substantial equity stake. Chairman Bret Taylor acknowledged discussions on Altman’s equity but clarified no concrete decisions have been made.

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