OpenAI, the artificial-intelligence leader behind ChatGPT has closed a massive funding round, raising $6.6 Billion and achieving a $157 Billion valuation.
OpenAI’s value was $80 billion earlier this year. This is up from $29 Billion in 2023.
OpenAI is now one of the world’s top three venture-backed startups, along with SpaceX and ByteDance (parent company of TikTok).
OpenAI did disclose the names of all investors in its press statement, but sources told CNBC that Thrive, Microsoft, Nvidia and SoftBank were among the major contributors.
Thrive Capital led by Josh Kushner reportedly planned to make a $1 billion investment in the round, while Microsoft Corp. had already invested $13 Billion in the startup.
Khosla Ventures and Altimeter Capital were also participants. Fidelity Management & Research Company was another participant. The new Abu Dhabi based tech investment company MGX participated.
The Wall Street Journal reported that Apple Inc. had not participated in the deal despite the fact that the company had previously been in discussions to invest in this round.
The size of this investment reflects tech industry’s unwavering faith in the potential of AI. OpenAI continues its dominance of the generative AI space.
Funding to expand AI research and computing capacity
In a blog posting announcing the funding OpenAI stressed its commitment to advancing AI and expanding its computing capability. It said:
The new funding will allow us double down on our leadership position in frontier AI research. We can also increase computing capacity and continue building tools to help people solve difficult problems.
OpenAI has seen explosive growth since the release ChatGPT at the end of 2022. The application brought generative AI to the public’s consciousness.
According to CFO Sarah Friar the company now boasts of 250 million active weekly users on ChatGPT.
There are also 11 million ChatGPT plus subscribers and 1,000,000 business users who pay for the service.
CNBC confirmed last Thursday that OpenAI generated $300 millions in revenue last month. This is up 1,700% from the beginning of last calendar year, according to The New York Times.
CNBC reported that the company expects sales to increase from $3.7 billion this year to $11.6 billion next year.
This rapid growth is not without cost. It expects to generate sales of $11.6 billion by 2025 but also expects to lose $5 billion this year.
These losses are due to OpenAI’s heavy dependence on Nvidia GPUs for training and running its large language models. This is essential to maintaining its AI systems.
Growing pains and executive departures
OpenAI has experienced many internal challenges including the loss of key executives.
After more than six years with the company, Mira Murati, Chief Technology Officer and interim CEO, announced last week her departure.
After her departure, Bob McGrew, the chief of research and Barret Zoph, the vice president of research also resigned.
OpenAI CEO Sam Altman is optimistic despite these setbacks. Altman stated this in an interview with Italian Tech Week.
“I hope this will be a great transition for all involved, and I hope OpenAI is stronger for it as we have been for all our transitions.”
Altman assured employees at an all-hands that the departures and restructuring were unrelated.
Altman also denied rumors that he would receive a “giant stake in equity” and called the claim “just not true.”
Board Chairman Brett Taylor echoed the sentiment, explaining that discussions regarding Altman’s compensation with equity were still ongoing but had yet to result in any concrete decisions.
Moving towards a profit-oriented model
OpenAI is also looking at a major restructuring, which could see the company move from its current nonprofit entity to a for profit entity.
Investors have been discussing this shift, as the nonprofit structure created friction with investors who wanted a return on investment.
Sources say that if the company decides to pursue a for profit status, the nonprofit division will remain a separate entity.
OpenAI would have new opportunities as it scales up its operations.
Investors are interested in the financial returns that an OpenAI for-profit could provide, given the capital they have invested.
This move could present legal and regulatory issues, as the company will need to ensure that the mission of the company, which is to advance AI in a safe and beneficial way, aligns with the profit objectives of its investors.
Future perspectives and AI dominance
OpenAI’s investment and growth trajectory indicate a bright future, even though it faces operational challenges.
Microsoft’s partnership has been crucial for the company. The tech giant has invested billions in OpenAI and integrated its models into Azure cloud platform.
Microsoft’s support for OpenAI provides the infrastructure and resources needed to achieve its ambitious goals.
OpenAI is expected continue to expand into new sectors, including AI-generated videos, photos, and other innovative applications.
OpenAI, with its funding and market position of strength, is well positioned to remain at forefront of the industry.
OpenAI’s Chief Financial Officer Sarah Friar summarized its potential in a recent statement.
“AI is already personalizing education, accelerating healthcare advances, and driving productivity. “And this is only the beginning.”
OpenAI’s new funding and vision will redefine the future of artificial Intelligence.
This post OpenAI raises $6 billion in funding and doubles valuation to $150 billion may be updated as new information unfolds
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