OpenAI closes $11 billion in new funding at a $1.25 trillion valuation, well below its original target

OpenAI has closed an initial $11 billion in new funding at a $1.25 trillion valuation, Reuters reported on November 6, citing a source familiar with the matter. The money is only the first portion of a round that could reach about $20 billion in total; Bloomberg reported the funding earlier the same day. OpenAI did not respond to Reuters' request for comment and has not issued a formal statement on the round.

Shrunk twice in five weeks

The round has shrunk twice in five weeks. Bloomberg first reported in late September that OpenAI was seeking $30 billion at a $1.4 trillion valuation; by October 22 the same $30 billion was being discussed at a lower $1.25 trillion valuation; and on October 30 the Financial Times reported that the target itself had been cut to $20 billion after some investors reduced their allocations. The $11 billion closed on November 6 is barely more than half of that final target, with the remaining roughly $9 billion expected in the coming weeks.

SoftBank and MGX take part; valuation down about a fifth from the opening ask

Two investors told Reuters that SoftBank and MGX, the Abu Dhabi state-backed fund, took part in the first close, with investors from the United Arab Emirates leading the round alongside Coatue, according to Bloomberg-sourced reporting. At the settled $1.25 trillion, the valuation is about a fifth below the up to $1.5 trillion OpenAI first sought. OpenAI chief financial officer Sarah Friar confirmed on CNBC's Squawk on the Street on November 6 that the round is ongoing, without disclosing terms.

A snapshot of cooling AI valuations

The funding landed after a month of cooling sentiment toward AI companies, with AI-related stocks pulling back and investors questioning how quickly huge spending on computing power will pay off. OpenAI remains one of the world's most valuable private companies, but the shrunken round shows that even the industry leader now has to accept a lower price than it was asking a few weeks ago.

(Sources: Reuters, Bloomberg, Financial Times, CNBC.)