The News
OpenAI is valued at $157 billion, according to multiple reports, double what it was just nine months ago.
The ChatGPT maker just closed a funding round led by Thrive Capital to raise an additional $6.6 billion. Microsoft, Nvidia, Japanese tech conglomerate SoftBank, and Emirati investment firm MGX also took part.
The milestone marks a turbulent moment for OpenAI: Multiple key employees have left in the last year and the startup plans to restructure to become a for-profit company after years of being run by a nonprofit board.
SIGNALS
Decision to go for-profit may be ‘tearing company apart’
OpenAI’s evolution from nonprofit lab to one of the world’s most recognizable firms is in danger of “tearing the company apart,” The Wall Street Journal reported. Current and former employees said CEO Sam Altman seems largely detached from OpenAI’s day-to-day operations, and spends his time either promoting the business or raising money for commercial products. The tension is that “product-first culture is very different from research culture,” an early OpenAI employee said, requiring different, business-oriented talent that ultimately forms a “different kind of company.”
ChatGPT maker stakes its ground against competitors
During its latest round of funding negotiations, OpenAI demanded exclusive arrangements and that investors do not help competitors like Elon Musk’s xAI, according to the Financial Times. That assertiveness “risks inflaming existing tensions with competitors,” the FT wrote, especially Musk — one of OpenAI’s founders — who is suing OpenAI. Investors rarely agree to exclusivity, according to venture capitalists, but OpenAI is perhaps more able to command such terms because investors are convinced the company will dominate the next wave of AI innovation. “If a company holds all the cards, they can force people to do things unnaturally,” one VC partner said.
OpenAI is burning through cash
Despite anticipating $3.7 billion in sales in 2024, OpenAI is rapidly burning through cash and expects to lose some $5 billion this year. Some of the money pays employees’ salaries and rent, The New York Times reported, but like other high-profile AI startups, the firm is struggling with the cost of computing power: Microsoft has pumped more than $13 billion into OpenAI, with the bulk paying for Microsoft’s cloud computing systems, which host OpenAI’s products. On top of these immediate costs, running the kinds of data centers needed to power the technology Altman envisages will also cost billions. Altman himself has previously suggested that, without more resources going toward building AI infrastructure, the world could see a future war over the technology.