OpenAI’s Valuation Soars to $80 Billion After Secondary Share Sale

OpenAI, the artificial intelligence company backed by Microsoft, has completed a deal that values the company at $80 billion or more, nearly triple its valuation in less than 10 months, according to the New York Times.

The deal involved a secondary share sale led by venture capital firm Thrive Capital, which allowed existing shareholders, including employees, to cash out their shares in the company, rather than a traditional funding round that would raise money for business operations.

OpenAI, which declined to comment on the deal, is now one of the world’s most valuable tech startups, behind ByteDance and SpaceX, according to data from CB Insights. The deal is another example of the Silicon Valley deal-making machine pumping money into a handful of companies that specialize in generative AI – technology that can generate text, sounds and images on its own.

The funding boom kicked off early last year, after OpenAI captured the public’s imagination with the release of the online chatbot ChatGPT, which can converse with users on various topics using natural language. The chatbot, which is powered by OpenAI’s GPT-4 model, a massive neural network with 175 billion parameters, has been integrated into various products, including Microsoft’s Bing search engine.

OpenAI has also released other AI tools, such as DALL-E, which can create images from text prompts, and Sora, which can generate videos from text prompts. The company has also been experimenting with adding deeper memory to ChatGPT, so that the tool can remember more of its users’ chats.

OpenAI was founded in 2015 by a group of prominent tech entrepreneurs and researchers, including Elon Musk, Peter Thiel, Reid Hoffman, and Sam Altman, with the mission of creating artificial general intelligence (AGI), a level of AI that can perform any intellectual task that a human can. The company operates as a nonprofit research organization, with a for-profit arm that handles its commercial partnerships and products.

The company has attracted a number of major funding rounds, including Microsoft’s investment of $10 billion in January 2023, bringing its total investment in OpenAI to $13 billion. Microsoft also agreed to provide OpenAI with access to its Azure cloud computing platform, which hosts the company’s AI models and tools.

The company agreed to a similar deal early last year, when venture capital firms Thrive Capital, Sequoia Capital, Andreessen Horowitz and K2 Global agreed to buy OpenAI shares in a tender offer, valuing the company at around $29 billion.

The latest deal comes after a brief period of turmoil in late 2023, when Altman, who serves as the CEO of OpenAI, was fired by the company’s board over leadership issues, but was later reinstated following employee outrage and board resignations. The company hired law firm WilmerHale to review the board’s actions and Altman’s leadership, and is expected to finish its report on the episode early this year.

The large investments in OpenAI have also attracted the attention of regulators, who have expressed concerns over the potential antitrust and ethical implications of the company’s dominance in the AI field. The European Commission and the Federal Trade Commission in the US have both launched investigations into whether Microsoft’s backing of OpenAI raises competition issues.

OpenAI’s valuation is a testament to the growing demand and interest in AI, especially generative AI, which has the potential to revolutionize various industries and domains. However, the company also faces significant challenges and risks, such as ensuring the safety and reliability of its AI systems, maintaining its research transparency and social responsibility, and navigating the complex regulatory and ethical landscape of AI.