AI startup OpenAI is reportedly in talks with venture capital firms to raise a significant capital injection, which could value the company at over $100 billion.
Largest investment in over a year
Venture capital firm Thrive Capital plans to invest $1 billion in the funding round, and tech giant Microsoft is also expected to contribute. This would be the most substantial new capital infusion for AI firms since Microsoft invested $10 billion in OpenAI in January 2023. Microsoft currently holds a 49% stake in OpenAI, having invested $13 billion since 2019.
Criticism of OpenAI’s business
AI firms continue to attract investors despite reporting relatively small earnings. OpenAI’s annualized revenue is around $3.4 billion. Several commentators have criticized OpenAI’s business model, with tech reporter Ed Zitron describing it as “untenable”: "For OpenAI to survive beyond 2026, the company would need to raise more funding than any startup in history." Projected losses for the company in 2024 could be as high as $5 billion.
Competition in the AI market
The news of a potential new funding round comes amid an increasingly competitive landscape for AI companies. Google has spent billions launching its AI product Gemini, Amazon and Google have jointly invested $6 billion into Anthropic, and Meta has been developing its own AI, Meta AI, using the open-source model Llama 3.1.
OpenAI's plans to raise substantial capital highlight the company’s serious intent to solidify its position in the AI market despite criticism and competition.
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