OpenAI Cuts Funding Target by $10B to $20B as AI Stock Rout Sours Investor Appetite

OpenAI has slashed the target for its latest funding round by $10 billion, trimming its goal to about $20 billion as a rout in AI-linked tech stocks cools investor appetite, according to multiple reports.

CNBC confirmed the reduced target on Saturday, citing a person directly familiar with the deal. The round remains in progress and has not closed, so figures are subject to change, the person said, asking not to be named as they were not authorized to discuss details publicly. OpenAI did not immediately respond to a request for comment.

The Financial Times first reported the cut, saying the ChatGPT developer had lowered its target by $10 billion and would seek a post-money valuation of $1.25 trillion, down from an earlier reported $1.4 trillion. Reuters, citing the FT, also reported the valuation drop to $1.25 trillion from $1.4 billion — a figure that appears to be a typographical slip in the original wire copy for the same $1.25 trillion valuation.

OpenAI set a Friday deadline for investors to commit to the round, according to the FT, but the "first close" is expected to raise less than $20 billion after some investors reduced their allocations. A subsequent retail offering for wealthy individuals could bring total funding to the $20 billion target, the FT said, with those individuals able to invest at the $1.25 trillion valuation.

The Wall Street Journal, in a follow-up report cited by TechCrunch, said the company has secured $11 billion so far and that its fundraising efforts met with a "tepid" response from some large investors.

UAE investors lead, venture firms expected

A consortium of UAE investors that includes state-backed technology fund MGX is expected to be the largest participant in the round, according to the FT. As part of the deal, OpenAI would gain the option to lease newly developed computing capacity in the region, the newspaper added.

CNBC reported that UAE investors are leading the round alongside Coatue. Venture capital firms including Founders Fund, Coatue, Sequoia Capital and Andreessen Horowitz are also expected to participate, per the FT report.

OpenAI, MGX, Coatue, Sequoia Capital and Andreessen Horowitz did not immediately respond to Reuters requests for comment. Founders Fund could not be reached.

AI spending worries hit tech stocks

The funding cut follows a week in which investors questioned whether big tech firms' heavy spending on AI — particularly data centers and GPUs — will deliver adequate returns.

AI-linked stocks sank on Friday. Chip maker Intel fell 25% on lackluster revenue guidance, Micron dropped 5.5% and Nvidia declined 4%, CNBC reported. Microsoft, Alphabet's Google and Amazon have been on a spending blitz to meet AI infrastructure demand, but all three issued capex figures or forecasts last week that came in below analyst estimates.

Alphabet saw its worst trading day ever on Thursday after search revenue fell short of expectations, CNBC said. Philipp Schindler, the company's chief business officer, said the impact on search was partly due to lower monetization within the company's AI Mode.

The tech-heavy Nasdaq index dropped 2.9% on Friday and is down 7.8% from its all-time closing high reached on October 6, according to Reuters.

IPO race with Anthropic

OpenAI, which is pursuing a listing in 2027, has been keen to close the funding round partly to get ahead of Anthropic's imminent listing, as the two companies tap a similar investor base, Reuters reported. Anthropic's planned IPO could also be facing challenges, TechCrunch noted.

OpenAI was previously reported to be raising $30 billion at a $1.4 trillion valuation, and then at a $1.25 trillion valuation, ahead of the planned IPO, TechCrunch reported.