OpenAI eyes $500B valuation ahead of potential IPO

Fresh off an $8.3 billion raise that values the ChatGPT maker at $300 billion, OpenAI is reportedly in early talks over a stock sale that could push its valuation to an eye-watering $500 billion. The deal would give current and former employees a chance to cash out, according to a source who spoke to Reuters.

The potential share sale—coming ahead of a possible IPO—could see employees unload several billion dollars’ worth of stock. The move reflects both OpenAI’s sharp climb in users and revenue, and the heated race among AI firms to lure top talent with lucrative compensation.

“The transaction, which would come before a potential IPO, would allow current and former employees to sell several billion dollars worth of shares,” Reuters reported, citing a source who requested anonymity because the talks are private.

Backed by Microsoft, OpenAI has seen explosive growth since the debut of ChatGPT. Weekly active users have jumped from around 400 million in February to roughly 700 million today. The company doubled its revenue in the first seven months of the year, hitting an annualized run rate of $12 billion, and is on pace to reach $20 billion by year’s end, the source said.

SoftBank, which is leading OpenAI’s earlier $40 billion funding round, has until the end of the year to deliver its $22.5 billion commitment. The rest of that round has already been subscribed at the $300 billion valuation.

The competition for AI talent is intense. Meta has been pouring billions into Scale AI, aiming to poach its 28-year-old CEO Alexandr Wang to head up a new superintelligence unit. Other private companies like ByteDance, Databricks, and Ramp have also turned to private share sales to update valuations and reward long-serving employees.

Thrive Capital, one of OpenAI’s existing investors, is reportedly considering taking part in the employee sale. The firm declined to comment. Bloomberg first reported on the talks.

The discussions come as OpenAI explores a major corporate restructuring to move away from its capped-profit model, paving the way for a public listing in the future. CFO Sarah Friar said in May that an IPO would only happen once both the company and the markets were ready.

Meanwhile, the current fundraising efforts are modest compared to the $7 trillion funding that OpenAI CEO Sam Altman reportedly aimed for in February. This ambitious funding was part of Altman’s strategy to significantly increase the global supply of AI chips.

Founded in 2015 by Sam Altman and Elon Musk, OpenAI started as a nonprofit focused on developing safe and beneficial artificial general intelligence. In 2020, it shifted to a commercial model, marking a significant shift in its strategy. Despite internal challenges, including Altman’s brief departure in November, OpenAI remains at the forefront of the AI industry, driven by the success of ChatGPT, launched in 2022.