OpenAI has officially finalized a groundbreaking deal, facilitating the sale of employee shares that now place the artificial intelligence powerhouse’s valuation at an incredible $500 billion. This significant development was confirmed by two individuals with intimate knowledge of the agreement.
This massive transaction cements OpenAI’s position as the planet’s most valuable privately-owned company. According to data from the startup tracking firm CB Insights, it has now overtaken SpaceX, the rocket company founded by entrepreneur Elon Musk, which previously held the top spot.
The arrangement saw both current and former OpenAI staff agree to sell approximately $6.6 billion worth of shares to a group of investors. Among the prominent participants were the Japanese conglomerate SoftBank and the venture capital firm Thrive Capital. These details were shared by sources who requested anonymity, as they were not authorized to discuss the agreement publicly.
The initial report of this monumental news came from Bloomberg.
OpenAI’s valuation has experienced a phenomenal ascent over the past year. It surged from $157 billion last October to a remarkable $300 billion by March. The innovative startup has consistently attracted billions in funding from key investors, including tech giant Microsoft, chipmaker Nvidia, SoftBank, and Thrive. This capital infusion is vital as OpenAI continues its mission to develop cutting-edge AI technologies, such as its popular online chatbot, ChatGPT.
Earlier in March, OpenAI secured a separate agreement with SoftBank and other investors for a funding round aiming to raise an additional $40 billion before the end of the year. However, a crucial clause in this deal grants SoftBank the right to reduce its committed funds if OpenAI fails to complete a complex corporate restructuring that has been in progress since last year.
Notably, Elon Musk, who co-founded OpenAI before his departure in 2018 following a power struggle, has also initiated legal proceedings against OpenAI and its chief executive, Sam Altman, attempting to block the aforementioned restructuring.
Late last month, Nvidia announced its ambitious plan to invest a staggering $100 billion in OpenAI over the next several years. A source familiar with the agreement confirmed that Nvidia’s initial investment totals $10 billion, based on OpenAI’s current $500 billion valuation. This substantial stake provides Nvidia with approximately 2 percent ownership in OpenAI.
Nvidia’s investment further exemplifies OpenAI’s strategy of attracting capital from companies whose products and services are integral to its operations. Microsoft, for example, invested over $13 billion in OpenAI between 2019 and 2023. These investments ultimately generated billions of dollars for Microsoft, as OpenAI subsequently paid for the immense computing power required to develop and deploy advanced technologies like ChatGPT.
It is important to note that The New York Times filed a lawsuit against OpenAI and Microsoft in 2023, alleging copyright infringement of its news content in relation to AI systems. Both companies have vehemently denied these allegations.