Apple Withdraws From OpenAI’s Ambitious $6.5 Billion Funding Round
The tech giant recently fell out of the talks for the round, set to close next week. Last month, it was reported that Apple was a part of the negotiations, as part of OpenAI’s new fund-raising effort that could value the company above $100 billion.
Apple has made an exit from negotiations to participate in an OpenAI funding round expected to raise about $6.5 billion, according to the Wall Street Journal reports.
The tech giant recently fell out of the talks for the round, set to close next week. Last month, it was reported that Apple was a part of the negotiations, as part of OpenAI’s new fund-raising effort that could value the company above $100 billion.
Other firms including Microsoft, Nvidia and Khosla Ventures, have also been in talks to participate in the campaign. Microsoft was expected to invest about $1 billion after having already pumped in $13 billion into the company.
Thrive Capital is investing more than $1 billion of OpenAI’s current $6.5 billion fundraising round. It can potentially invest another $1 billion next year at the same valuation if the ChatGPT maker hits a revenue goal. If the valuation of OpenAI continues to soar at a rapid rate, Thrive could increase its stake next year at a discounted price.
The high valuation is an outcome of the AI arms race OpenAI sparked with its launch of ChatGPT in late 2022, tempting companies across industries to invest billions in the technology to stay ahead of the competition and capture market share.
The revenue of OpenAI is expected to skyrocket to $11.6 billion next year from an estimated $3.7 billion in 2024. Losses are expected to be as much as $5 billion this year, depending largely on their spending for computing power that could change, according to sources.
The current funding round, which comes in the form of convertible debt, could value OpenAI at $150 billion.
OpenAI’s revenue expectations far exceed CEO Sam Altman’s earlier projection of $1 billion in revenue this year. The sources of revenue are sales of its services to corporations and subscriptions to its chatbot.
The company’s flagship product, ChatGPT, is expected to bring home $2.7 billion in revenue this year, jumping from $700 million in 2023. The chatbot service, which charges a $20 fee every month, has about 10 million paying users.
The company generated $300 million in revenue last month, a hike of 1,700% since the beginning of last year.
OpenAI is reportedly planning a major restructuring that would turn its core business into a for-profit benefit corporation, no longer controlled by its non-profit board. This move is expected to make the company more appealing to investors, though the non-profit arm will continue to exist and retain a minority stake in the for-profit entity. As part of the restructuring, Altman is set to receive equity in the for-profit company for the first time.
