OpenAI raises $11 billion — but at a valuation $150 billion below its ask
OpenAI Raises $11B at a $1.25T Valuation
OpenAI closed the first $11 billion of a round at a $1.25 trillion pre-money valuation, well short of the $1.4 trillion it reportedly sought, after AI stocks sold off. CFO Sarah Friar says the business grew 70% quarter over quarter, with 1.2 billion weekly ChatGPT users, but up to $9 billion more remains unclosed. The gap lands on Microsoft's accounting gains and NVIDIA's reliance on lab funding.
Management also said frontier labs "are growing faster than what their balance sheets and credit profiles can support."
- cmiles8
The real headline is that they couldn’t hit what they wanted in terms of valuation and funds raised. Just were not enough people willing to invest given concerns that it may be downhill from here for a while on AI.
This will also make it even harder to avoid any future IPO being a down round. They’re almost certainly worth much less than Anthropic and Anthropic is, per reports, struggling to keep its valuation much above 1T, and even that may fall through.
- bob1029
OpenAI seems to me like they are operating with a slightly longer horizon strategy than Anthropic. Going for the IPO is the last resort in my mind. It is what you do to get ahead of deteriorating financial conditions. I don't think Anthropic had a choice at their projected burn rate. Why would we surrender all our cloaks and daggers unless we absolutely have to? The political and regulatory headwinds are not looking favorable for AI companies as of a few days ago.
Going for the IPO collapses a large space of options that are available to the business. The AI business is entirely about data. Anthropic's IPO would generate an incredible amount of data that could be used by its competitors to refine their strategy. Knowing where to allocate capital is perhaps worth more than the capital itself at these scales.
- chris_va
We always see these headlines and think "is XYZ company actually worth that much?"
Class A stock gets paid out first, so "valuation" here is not what a retail investor would necessarily pay for class C.
Basically, do these people think that they'll get their $11B back? If so, they are ok with a high "valuation" because there is little risk. And with OpenAI's corporate structure, who knows what is actually happening.
- vb-8448
I'm still astonished on how musk outplayed everyone with the spacex ipo.
- GodelNumbering
There was an unconfirmed report that upto $10 billion in this round were pledged by a syndicate of UAE investment funds, including MGX
https://www.bloomberg.com/news/articles/2026-10-05/openai-in...
- odyssey7
I think OpenAI is one of the most important companies in a generation, but on a tangent, I remember the first time a company broke a $1T market cap, and it was a significant moment. Nowadays multi-trillion-dollar valuations are becoming more common — I wonder how much it reflects inflation vs companies being genuinely bigger than they used to be. If it’s more about inflation, then we can expect to see dozens and hundreds more in the coming decades. Founders: recalibrate your ambition for the new era.
- proxyscore
I don't like open AI but it seems their model is good now to eat up CAD, a craft I had learned, it's really impressive by now, more impressive than claude with code if you ask me.
- krona
An average 40% efficiency gain of hardware (GPUs/TPUs, FLOPs/watt) per year, combined with the capital intensity, is enough to bankrupt everyone, every few years. If it cost $1Tn to create a model, perhaps there wouldn't be any competition, but in the $5Bn range there are too many players, and demand appears to be either limited or not growing fast enough; Anthropic's claimed TAM of $30Tn is, let's be honest, a joke.
There are several historical precedents of these three factors (capital intensity, low margins, high competition): Airlines in the 70s-80s, fiber in the 90's, railroads late 19th century, steel production post WWII, and more.