OpenAI secures US$110bn as Amazon, Nvidia and SoftBank go all-in
OpenAI has secured US$110bn of cornerstone commitments from three of its core backers, as the ChatGPT owner moves ahead with what will now undoubtedly be the largest capital raise ever seen – with additional investors set to join as the round progresses.
Most of the money will come from two of its suppliers. Amazon has pledged to inject up to US$50bn as part of a wider deal that will cement its AWS cloud computing business as a critical provider of compute. Nvidia will also invest US$30bn as part of a commitment from OpenAI to buy more of its chips.
SoftBank Group, which is already one of the AI developer’s largest shareholders, will also buy US$30bn of new shares.
The agreement comes after a US$41bn funding round in March and gives OpenAI a pre-money valuation of US$730bn – almost triple its pre-money valuation in the deal almost a year ago.
The fundraising comes at a critical time for OpenAI, which is racking up enormous losses as it goes all-in in the race to dominate the AI field. It lost US$8bn last year – but that shortfall is expected to swell to more than US$200bn over the next four years as it ramps up its capital expenditure.
Unlike rivals such as Google's parent Alphabet and Facebook-owner Meta Platforms, which have highly profitable legacy businesses generating hundreds of billions in revenue every year, OpenAI has never turned a profit. While user numbers are rising rapidly, it only generated US$12.5bn in revenue last year – below its internal targets.
“SoftBank, Nvidia, and Amazon are long-term partners who share our ambition to turn real scientific progress into systems that deliver meaningful benefits for people at global scale,” said Sam Altman, co-founder and chief executive of OpenAI, in a statement announcing the investments.
Costly race
On the face of it, OpenAI is already ahead in the race to be the leading AI player following the runaway success of its generative AI chatbot. Since launching ChatGPT in 2022, it has amassed 900 million weekly active users, double the traffic of rival AIs developed by Meta and Alphabet.
But the cost of staying in the race is proving eye-wateringly expensive. OpenAI plans to increase its 1.9GW of compute to 36GW over the next eight years and has struck deals to build data centres and buy cutting-edge chips. The buildout will cost more than US$600bn over the next four years.
“AI is the most consequential technology of our time, and OpenAI is at the forefront,” said Jensen Huang, founder and chief executive of Nvidia. The chipmaker had previously talked about injecting US$100bn into OpenAI, but seems to have walked back on that pledge.
“We have been privileged to partner with OpenAI since its earliest days, as it delivered one breakthrough after another. Together, we will continue to push the frontier – building the infrastructure for the age of AI and scaling its benefits to serve industries and societies worldwide.”
The Amazon investment will be staggered, with the e-commerce giant initially buying just US$15bn of shares. The additional US$35bn investment will be contingent on either OpenAI “meeting specified milestones” – or the company completing an IPO, whichever comes first.
“Our strategic partnership with OpenAI creates significant value for both companies, and our investment reflects conviction in their trajectory,” said Andy Jassy, president and chief executive of Amazon. “OpenAI is well positioned for long-term success.”
SoftBank is also expected to stagger its investments. The Japanese investment company is in talks with banks to borrow US$10bn or more though it is walking a financial tightrope, keen to increase its US$34.6bn bet on OpenAI – but without breaching the company’s leverage pledges.