OpenAI Reportedly in Talks for Massive $150 Billion Valuation Boost

According to insiders, artificial intelligence (AI) leader OpenAI is in talks to raise $6.5 billion from investors at a company valuation of $150 billion.

It is reported that the new valuation (excluding the funds raised) is significantly higher than the $86 billion valuation in the company's tender offer earlier this year, solidifying its position as one of the world's most valuable startups.

At the same time, one of the insiders said that OpenAI is also in talks to raise $5 billion from banks in the form of revolving loans. However, the negotiations are still ongoing, and the terms may change.

According to previous media reports, this round of financing will be led by Thrive Capital. In addition, the company's largest investor, Microsoft, will also participate. Apple and Nvidia have also been in talks about investing. There was previously news that Nvidia intended to invest $100 million in OpenAI's new round of financing.

OpenAI's Chief Financial Officer, Sarah Friar, said at the end of last month that the company is seeking new financing, but did not disclose specific details. Friar said that OpenAI will use this financing to obtain more computing power and to fund other operating expenses.

OpenAI is not the first large tech startup to seek a revolving credit facility from Wall Street banks. Many tech companies, including Facebook (now Meta Platforms Inc.), Uber Technologies Inc., and DoorDash Inc., have sought credit facilities from Wall Street before seeking an initial public offering (IPO), often partly to strengthen relationships with banks.

Historically, companies often reward banks that have undertaken large credit commitments in the IPO. In return, lenders sometimes offer better financing terms.

Founded in 2015, OpenAI has been at the center of the tech industry's rapid shift towards artificial intelligence. Its easy-to-use chatbot ChatGPT debuted in 2022, sparking an investment frenzy. The company's products can generate realistic images and human-like text with just a few prompt words, attracting the attention of consumers and investors.

Initially established as a non-profit organization, OpenAI transitioned to a for-profit startup in 2019. Since then, Microsoft has invested $13 billion in OpenAI, owning 49% of the latter.

However, now only a few of the original founding team members remain, and the company has taken steps to overhaul its board of directors and expand its executive team.