Microsoft-backed AI firm OpenAI is in talks to sell existing employees’ shares with potential investors at an $86 billion valuation, a report by Bloomberg stated. The terms of the deal are still in negotiation and could change, the source told.
Last month, the Wall Street Journal reported that the ChatGPT maker was seeking to sell shares at a valuation of up to $90 billion. Earlier this year, the company had made a $300 million share sale at a valuation of $30 billion.
The company is on track to generate $1 billion in annual revenue as ChatGPT proliferated the rise in generative AI technology while pushing the valuation of the AI startup massively.
At $86 billion, OpenAI would become one of the world’s most valuable closely held companies, behind Elon Musk’s SpaceX and TikTok’s parent company, ByteDance and ahead of companies like Chinese online fast fashion retailer Shein and fintech company, Stripe.
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Microsoft holds a 49% stake in OpenAI after having invested $10 billion into the company earlier in January this year. Under the terms, OpenAI pledged to integrate its GPT-powered models into Microsoft’s products in exchange for compute to train and run its models.
The transaction pegged OpenAI at a $29 billion valuation which is drastic change considering the firm’s early beginnings as a non-profit AI research startup. However, in 2019, president and co-founder Greg Brockman shifted the ownership structure to a capped-profit one. This means that there is an upper limit on the amount of money each investor can expect to make on their returns.
Brockman had then defended the move citing the need for capital to grow exponentially while keeping pace with developments in AI.
