OpenAI is in talks to strike a deal involving employee shares that would boost its value to $80 billion, according to recent reports. For the maker of generative artificial intelligence tools ChatGPT and DALL-E, that number is triple its valuation in January.
That would make OpenAI the third most valuable private company in the world—leapfrogging fintech Stripe and fast-fashion retailer Shein to land right behind ByteDance, parent of TikTok, and Elon Musk’s SpaceX, respectively, according to market research firm CB Insights.
OpenAI would also become the most valuable company in San Francisco, near the backyards of tech giants Meta and Google, which are racing to integrate AI into all of their processes and products.
Analysts say that amid intense antitrust scrutiny, tech companies have been finding ways to work with startups rather than outright own them. Last month, Amazon said it would invest up to $4 billion in San Franciso–based Anthropic, a rival to OpenAI. Microsoft Corp., another major investor in the AI industry, owns 49% of OpenAI.
OpenAI has been in talks with investors including Thrive Capital, based in New York, to sell as much as $1 billion worth of employee shares in a so-called tender offer, the Financial Times reported. Such a deal would not only let employees cash in on the company’s success but also could help OpenAI compete with other startups and more-established rivals for engineering talent.
AI is the bright spot in VC funding
Although global startup funding is down this year, capital for AI-related firms remains the exception. For instance, Character.AI, a chatbot maker, is in discussions to raise funding that could value it at more than $5 billion, Bloomberg reported in September.
In the past, AI wasn’t necessarily a hot marketing term. Investors are betting this time will be different. “Three years ago, I advised AI companies specifically to not mention AI because it scared away customers,” Sandhya Venkatachalam, partner at Khosla Ventures, a venture capital firm that invests in tech companies including OpenAI, told Quartz.
OpenAI as a public company?
OpenAI, which spurred the generative AI boom, is leading the pack of
startups for now. It and other large language model (LLM) specialists, which develop chatbots that generate new content, could create the next wave of public tech giants, but it’s doubtful that many will have the money and other resources to build such technology from scratch.
Investors are optimistic about OpenAI, though. “The willingness of VCs to underwrite this valuation shows they believe OpenAI can become a standalone public company with a significant chance of being valued over $1 trillion in the future,” said Brendan Burke, a senior emerging technology analyst at PitchBook.
OpenAI is reportedly on track to generate $1 billion in annual revenue from ChatGPT. It’s also exploring how to make its own AI chips and leading the development of artificial general intelligence—which CEO Sam Altman has described as “the equivalent of a median human that you could hire as a co-worker.”