PYMNTS-MonitorEdge-May-2024

Report: OpenAI Share Sale Could Value Firm at $90 Billion

OpenAI is reportedly readying a share sale valuing the company at $90 billion. 

That’s according to a recent New York Post report which notes that the deal could depend on wealthy investors in the Middle East as conflict continues in that region. 

A source told the Post that the artificial intelligence (AI) company is in discussions to help employees sell tens of millions in private stock in a tender offer expected to close Oct. 21.

“There is a lot of overseas demand… some from The Gulf,” said one “well-placed” source, per the report.

However, sources also said the forecast for this sort of tech deal is unclear, with U.S. investors seemingly put off by OpenAI’s steep price tag, and Israel’s war against Hamas complicating new funding from Gulf region sovereign wealth funds.

“The fact the Saudis have remained silent about the conflict means anyone taking money is going to think long and hard before they take another political dollar,” a source who raised money in the region told the newspaper.

PYMNTS has contacted OpenAI for comment but has not yet received a reply.

Last week saw reports that OpenAI was readying updates designed to make its AI models more efficient and affordable for developers. A report by Reuters said the updates include the addition of memory storage to OpenAI’s developer tools.

This enhancement could potentially lower costs for application makers by up to 20 times, a move that is critical for OpenAI as it seeks to support partners in creating sustainable businesses based around AI software.

And as PYMNTS wrote recently, the high cost of AI — fueled mainly by the computing power an AI model needs — is “an uncomfortable and expensive reality that businesses need to adapt to in order to remain competitive.”

For example, Microsoft’s Bing AI chatbot, powered by OpenAI, needs an estimated $4 billion — at least — of infrastructure just to do its job. OpenAI spends up to $700,000 daily maintaining its infrastructure and server costs, with the company seeing losses of $540 million in 2022.

“Even when they aren’t being used by customers, AI models need to be constantly re-trained and fine-tuned to stay relevant and safe, a computationally heavy process that isn’t necessarily easy on a firm’s war chest,” PYMNTS wrote. “Despite all this, the generative AI industry itself is expected to grow to $1.3 trillion by 2032.”

PYMNTS-MonitorEdge-May-2024