OpenAI pares its funding target to $20 billion from $30 billion

OpenAI is seeking to raise up to $20 billion in a new funding round, paring back an earlier target of up to $30 billion. The Financial Times first reported the reduction, and CNBC confirmed it on October 31.

The round is still in progress and has not closed, so the figures are subject to change, a person directly familiar with the deal told CNBC. According to the FT, the ChatGPT developer is seeking a post-money valuation of $1.25 trillion, set a Friday deadline for investors to commit, and saw some investors reduce their allocations. Investors from the United Arab Emirates are leading the round alongside Coatue, CNBC has previously reported.

TechCrunch noted that OpenAI had earlier been reported to be raising $30 billion at a $1.4 trillion valuation, and that, per the FT, the first close is expected to come in below $20 billion, with a subsequent offering for wealthy individuals potentially bringing the total to the target. The Wall Street Journal reported that OpenAI has secured $11 billion so far and met a "tepid" response from some large investors. OpenAI did not immediately respond to requests for comment.

The news follows a week in which investors questioned whether Big Tech's spending on AI, especially on data centers and GPUs, will deliver adequate returns. AI-linked stocks sank on Friday, CNBC reported, with Intel down 25% on lackluster revenue guidance, Micron down 5.5% and Nvidia down 4%. Alphabet had its worst trading day ever on Thursday after its search revenue fell short of expectations.

A smaller raise would limit the capital available for OpenAI's large infrastructure commitments and comes as rival Anthropic prepares to go public, adding competition for investor dollars.

Sources: CNBC, TechCrunch. Image: CNBC