OpenAI raises $11 billion at $1.25 trillion valuation amid concerns over AI spending and regulation

OpenAI has secured around $11 billion in fresh funding as the first tranche of a fundraising round that values the artificial intelligence company at $1.25 trillion, Bloomberg reported.

The funds had been transferred to the company by Friday, according to the Bloomberg, citing people familiar with the matter who requested anonymity. The remaining portion of the round is expected to be completed in the coming weeks, potentially taking the total fundraising to as much as $20 billion.

The latest funding comes after OpenAI spent more than a month in discussions with investors to raise capital, having delayed its plans for an initial public offering (IPO). The company had initially sought to raise at least $30 billion at a valuation of $1.4 trillion, according to an earlier Bloomberg report. However, it scaled back its fundraising ambitions amid a sell-off in AI stocks.

Who are the latest investors

Investors participating in the first tranche include Coatue Management and T. Rowe Price. Other investors in the broader round include SoftBank Group Corp., Sequoia Capital, Founders Fund and Andreessen Horowitz. A group of investors from the United Arab Emirates has also joined the fundraising

OpenAI is also working with investment banks to raise money from high-net-worth individuals and retail investors.

The reduced fundraising target marks a shift for OpenAI, which has been among the biggest beneficiaries of the investment boom in artificial intelligence. However, investor sentiment towards the sector has changed amid concerns over the scale of spending on physical infrastructure for AI and possible hurdles to data centre construction following the US midterm elections.

Shift in sentiment affecting Anthropic too

The shift in sentiment is also affecting rival Anthropic's fundraising and listing plans. Investors considering its upcoming initial public offering are reassessing the company's valuation, with discussions now centred on a range of $1.2 trillion to $1.3 trillion, down from an earlier expectation of $1.5 trillion.

Meanwhile, Wall Street's technology stocks staged a recovery on Friday after recording their sharpest fall in more than a year. However, the rebound failed to prevent the Nasdaq Composite from registering its fourth straight weekly decline. Investors remained cautious as they weighed whether tighter AI regulations and a possible slowdown in data centre investments could undermine the rally that had pushed US equities to record levels, Reuters reported.

The recovery was broad-based across the technology sector, with the semiconductor index climbing 4.2%. Nvidia gained 2.8%, while Advanced Micro Devices surged 11% and Sandisk rose nearly 4%. The Nasdaq ended the session 1.1% higher, having gained as much as 2% during the day.