OpenAI closes $6.6 billion funding haul with investment from Microsoft and Nvidia By Reuters

By Crystal Ho

(Reuters) – OpenAI announced on Wednesday that it has raised $6.6 billion from investors at a post-cash valuation of $157 billion, cementing the ChatGPT maker’s position as one of the world’s most valuable private companies.

The funding has attracted returning venture capital investors including Thrive Capital and Khosla Ventures, as well as OpenAI’s largest backer Microsoft (NASDAQ:), and new participation from Nvidia (NASDAQ:).

The closing of the funds coincides with the company’s ongoing restructuring efforts and executive changes, including the surprise departure of its longtime chief technology officer, Mira Moratti, last week.

Altimeter Capital, Fidelity, SoftBank (TYO:) and Abu Dhabi’s state-backed investment firm MGX also participated in the round.

The financing came in the form of convertible bonds, and is contingent on a successful structural change to a for-profit corporation that will no longer be controlled by a non-profit board, and the removal of the cap on returns to investors.

The personnel changes haven’t dampened the enthusiasm of most investors, who expect significant growth based on projections from OpenAI CEO Sam Altman and CFO Sarah Friar.

The company is on track to generate $3.6 billion in revenue this year due to mounting losses of more than $5 billion. It expects a big jump in revenues next year to $11.6 billion, according to sources familiar with the numbers.

Investors also got some protection, as OpenAI undergoes a complex corporate restructuring that will vest Altman’s shares. Talks are still ongoing, and no timetable has been set yet.

The sources said investors had negotiated terms that would allow them to recover their capital or renegotiate the valuation if the changes were not implemented within two years.

OpenAI’s meteoric rise in product popularity and rating has captured the world’s imagination. Since its launch, ChatGPT has attracted 250 million weekly active users. The company’s valuation also rose from $14 billion in 2021 to $157 billion as its revenues increased from zero to $3.6 billion, far exceeding Altman’s expectations at the time.

The company told investors that it is still actively pursuing artificial general intelligence (AGI), which means developing AI systems that go beyond human intelligence, as it ramps up commercialization and tries to be profitable.