Generative artificial intelligence leader OpenAI has raised $6.6 billion in new funding, valuing the startup at $157 billion, up from $86 billion early this year. New investors include Nvidia and Japan-based SoftBank. Nvidia stock climbed on Thursday.
"If you think Nvidia's shares are expensive, take a look at how much investors are shelling out for a stake in the private companies at the heart of the AI frenzy," Deutsche Bank analyst David Folkerts-Landau said in a report. "Given that it (OpenAI) is reportedly on course to generate around $4 billion in annual revenue, that values it at a multiple of almost 40 times gross sales."
The new round was led by venture capital firm Thrive Capital. Microsoft, which in 2023 invested $10 billion in OpenAI, put in below $1 billion in the new round, reports said. Apple did not take part in the funding round as once rumored.
Further, Nvidia invested about $100 million in OpenAI, said a Wall Street Journal report.
OpenAI is competing with startup Anthropic, Alphabet's Google, Facebook-parent Meta Platforms, Elon Musk's and xAI and others to develop the most advanced, efficient, and cost-effective generative AI models. Anthropic's investors include Amazon.com and Google.
Meanwhile, Anthropic plans a new fundraising round that would value it at as much as $40 billion, twice as much as in its last round about six months ago, according to The Information.
OpenAI Faces Stiff Competition
OpenAI has released a new large language training model capable of enhanced reasoning skills. Code-named "Strawberry," it's officially called OpenAI o1. The company says OpenAI o1 outperforms its earlier training model, GPT-4o. But it's more expensive to run than GPT-4o, its earlier model used to train ChatGPT.
"OpenAI may have been the first to release models that effectively leverage Chain-of-Thought (CoT) prompting, but alternative frontier model developers, such as Anthropic, Meta, Google and xAI, will likely release models with similar capabilities over the coming months," said Bank of America analyst Alkesh Shah in a report published Thursday.
He added: "Foundation models may become largely commoditized over the long term as model performance and capabilities converge, although we see the potential for moats to emerge due to licensing deals with data suppliers. We expect only a handful of large models to survive consolidation globally, but see the potential for millions of specialized small language models (SLMs)."
Nvidia Stock Gains 145% In 2024
Meanwhile, OpenAI plans to convert from a nonprofit organization to a for-profit company as top researchers continue to leave. But it could take a while for OpenAI to turn a profit.
OpenAI will lose roughly $5 billion this year amid high training costs for AI models, according to one report. The company estimates 2025 revenue at nearly $12 billion.
On the stock market today, Nvidia stock rose 3.4% to near 123. Microsoft stock dipped a fraction to near 416.
Meanwhile, Nvidia stock has gained 145% in 2024. Microsoft stock is up 11%.
Further, Nvidia is among AI stocks to watch.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
