OpenAI’s valuation has reached $500 billion in valuation following a deal that allowed employees to sell shares in the company. This was a significant step up from its previous valuation of $300 billion yet very much in line with the target, according to previous reports. The ChatGPT-maker has now surpassed Elon Musk’s to become the world’s largest startup.
Current and former OpenAI employees sold about $6.6 billion of stock to investors including Thrive Capital, SoftBank Group Corp., Dragoneer Investment Group, Abu Dhabi’s MGX and T. Rowe Price, a person familiar with the transaction, told Bloomberg.
This rise in valuation shows how artificial intelligence is still a source of hype for investors, who believe it has the potential to transform industries and economies. OpenAI is one of the companies leading the push to build data centers and develop AI services, an undertaking that’s expected to cost trillions of dollars. While it is yet to turn a profit, the company is helping fuel that infrastructure boom through deals with companies SK Hynix and Oracle.
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U.S. startups often negotiate share sales as a way to retain employees and reward them, as well as to attract external investors. OpenAI is looking to leverage investor demand to provide employees with liquidity that reflects the company’s growth. The total amount of eligible units sold in the secondary fell short of the $10 billion-plus worth of stock that the company allowed for sale, a person familiar with the matter told Bloomberg. The person also said that could mean current and former employees are demonstrating confidence in the long-term viability of the business.
This comes at a time when OpenAI is trying to transition into a more traditional for-profit company. The startup was founded in 2015 in order to “advance digital intelligence in the way that is most likely to benefit humanity as a whole.” Planned changes will give the existing OpenAI nonprofit entity control over a new public benefit corporation. SpaceX CEO Elon Musk, who co-founded OpenAI with its current CEO Sam Altman, sued the company, accusing it of straying from its original goal.
OpenAI recently entered high profile partnerships with Oracle and Microsoft. According to reporting from the Wall Street Journal, Oracle signed a deal with OpenAI for the AI company to purchase $300 billion worth of compute power over a span of about five years. This would be one of the largest cloud contracts ever signed.