Like a dinner party host who has overcooked their entrees, OpenAI is trying to lower expectations.
What happened: OpenAI said it was cutting the target for its next fundraising by US$10 billion, from US$30 billion to US$20 billion. It’s also seeking a lower post-money valuation — US$1.25 trillion, down from US$1.4 trillion.
The AI company has reportedly raised US$11 billion from large investors and will look to family offices and wealthy individuals to raise the rest.
Why it’s happening: The decision comes amid a sharp sell-off in AI-linked tech stocks that sent the Nasdaq 100 into correction territory last week. That’s been driven, at least in part, by anxious investors growing tired of waiting for historic AI investments to pay off.
Google parent Alphabet suffered its worst stock rout ever last week, wiping almost half a trillion dollars off its market cap. Amazon and Meta both slumped as well after reporting their earnings in recent weeks. More bearish news came when Blackstone told investors that credit agencies may not rate Anthropic as investment-grade after its IPO.
Why it matters: OpenAI’s fundraising hiccups are a sign of how much the investment climate for AI has changed in just a few months. While plenty of capital is still available, it’s no longer flowing quite so freely, and publicly traded hyperscalers — companies pulling up the money truck for data centres — are being punished for lavish spending.
Yes, but: Don’t confuse OpenAI trimming its sails a bit with an AI bubble popping, or even as evidence that there is an AI bubble. Last week also brought a flurry of announcements from SpaceX, Meta, and Broadcom about new multibillion-dollar financing deals — deals that likely wouldn’t be happening if the sector were in really deep trouble.
