OpenAI cuts funding target as AI market sell-off weighs on valuation

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OpenAI cuts funding target

Highlights

OpenAI reduced its fundraising target by $10bn, now seeking less than $20bn at a $1.25tn–$1.4tn valuation amid broad tech market declines.
A UAE-based consortium led by MGX will be the largest investor, granting OpenAI an option to lease new regional computing power as part of the deal.
Anthropic's upcoming public listing at a $1.5tn+ valuation and Nasdaq 100's 3.5 per cent drop add competitive and market pressure on OpenAI's fundraising round.

Revised fundraising terms and investor lineup

As reported by Financial Times, OpenAI has reduced the goal for its latest funding round by $10bn as it works to complete a deal affected by an AI-led market pullback and the upcoming public listing of rival Anthropic.

The ChatGPT maker was aiming last month to raise $30bn at a $1.4tn valuation, presenting the round as a final opportunity for investors to buy in before its own planned initial public offering next year. The company had cited a rapid rise in revenue since July to support a near doubling in its valuation from $852bn, but it has since lowered its expectations amid a broader decline in tech shares and rising concern over the pace and scale of AI investment.

OpenAI set a Friday deadline for investors to commit to the round. That first close is expected to bring in less than $20bn after some investors reduced their allocations, according to people with knowledge of the matter.

A consortium of investment groups from the United Arab Emirates, including state-backed tech fund MGX, is expected to be the largest participant. As part of the transaction, OpenAI is set to gain an option to lease newly developed computing power in the region.

Market pressure and competitive backdrop

Venture capital firms including Founders Fund, Coatue, Sequoia Capital and Andreessen Horowitz, along with Masayoshi Son's SoftBank, also plan to participate. A subsequent retail offering is expected to give wealthy individuals the option to buy into OpenAI at the $1.25tn valuation, potentially expanding the round to about $20bn.

OpenAI raised $122bn in March this year, but it plans to spend multiples of that amount on computing power needed to train and operate its models. One backer said the fundraising process began during strong enthusiasm for AI investments but was later hit by a sharp market reversal.

The tougher backdrop is also being shaped by competition for capital and attention from Anthropic, which is set to go public next month at a valuation of $1.5tn or more. The tech-heavy Nasdaq 100 fell 3.5 per cent on Friday, underscoring the pressure on growth-focused technology assets. OpenAI, Sequoia, Founders Fund and SoftBank declined to comment, while MGX, Coatue and Andreessen Horowitz did not immediately respond to requests for comment.

In our earlier article on the Nasdaq 100 (NDX) selloff, we noted the index slipping below key short- and medium-term moving averages amid heightened downside risk. The piece also highlighted the launch of JQQQ, a blockchain-native fund from Janus Henderson and Centrifuge, as a longer-term positive for institutional access even as near-term momentum stayed mixed.

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