In October, OpenAI’s market valuation doubled to $157 billion after a $6.6 billion fundraising round, putting it among the world’s most valuable companies. But there’s a lot going on behind this number.
Everything Looks Fine on the Surface: Several factors fuel this high valuation: projected revenue of $11.6 billion by 2025, an active user base of 250 million per week, a collaboration with Apple to integrate its chatbot with Siri, and a foundational AI model that’s kickstarting a new digital economy. While these are all promising signs, I always operate with caution when it comes to the market valuations of startups—especially one with unique circumstances like OpenAI.
Now to the Other Moving Parts: OpenAI’s infrastructure is at the core of a new economic era. But OpenAI also faces key challenges: spiraling costs, tough competition, and operational strain. The costs of training AI models are immense, and as CNBC notes, OpenAI expects to burn over $5 billion this year while bringing in $3.7 billion in revenue—without a clear, profitable business model. Unlike early giants like Google and Facebook, OpenAI faces significant competition and high operational costs.
High Turnover and Shifting Partnerships: Outside of the bad economics, there’s also high turnover among OpenAI’s co-founders, with 8 out of 11 having left to join rivals like Anthropic and Google DeepMind. Others, including Ilya, are pursuing new ventures, and Murati is expected to follow. This kind of attrition raises questions for investors. Meanwhile, OpenAI is reportedly losing the exclusive support of Microsoft, its closest ally.
Microsoft’s Evolving Relationship with OpenAI: Originally a nonprofit, OpenAI later created a for-profit subsidiary to attract investments like Microsoft’s. Microsoft gained a share of profits, but with a cap on both OpenAI’s profits and Microsoft’s share. Now, OpenAI plans to restructure as a “for-profit public benefit company,” allowing it to pursue social goals alongside investor returns. The original nonprofit will keep a small ownership stake in the restructured company. If more investors join, Microsoft’s influence could diminish, with ownership spread among multiple stakeholders.
Seeking Exclusivity with New Investors: In its latest fundraising round, led by Thrive Capital, OpenAI is reportedly seeking exclusivity agreements. This would mean that new investors commit not to fund its competitors, such as Gleen (i am surprised it made the list too). This move could be OpenAI’s way of securing long-term support and focus from investors—another layer to its growth strategy as it builds toward sustained market dominance.
Closing Thoughts: OpenAI’s incredible valuation and rapid evolution offers us a glimpse into what could happen in the future and with the kind of value it has, we can assume it is currently valued correctly but the key word is assumption.