OpenAI reportedly cuts funding target to about $20 billion, with about $11 billion committed

OpenAI has lowered the target for its new funding round from $30 billion to about $20 billion, the Financial Times (FT) reported, according to TechCrunch, The Next Web and Bloomberg (October 31). The company's $1.25 trillion valuation is reportedly unchanged. Investors have reportedly committed only about $11 billion. OpenAI has not announced any of this itself, and every figure here comes from press reports.

This article makes one point. Listed AI stocks are not the only thing being sold. Private placements in frontier labs, long assumed to fill up no matter how much was asked, are also starting to run into limits on how much investors will put in.

The reported figures

Here is what has been reported, broken down by source.

• Target: Cut by about $10 billion, from $30 billion to about $20 billion. Bloomberg's headline, which cites the FT, says OpenAI's funding goal was cut by $10 billion as AI stocks dipped (Bloomberg).
• Valuation: Reportedly unchanged at $1.25 trillion (TechCrunch).
• Commitments: Reportedly about $11 billion (The Next Web).

By our calculation, about $11 billion is roughly 55% of the reduced target and about 37% of the original $30 billion. That leaves the round about $9 billion short of even the lowered target.

Reported valuations and deal sizes have sometimes differed sharply from the actual filings. In one case, a figure reported as $250 billion turned out to be $105 billion in an 8-K. The $20 billion and $11 billion figures should be read as reported numbers until OpenAI confirms them in an announcement or a filing.

Holding the price, cutting the volume

If the reports are accurate, OpenAI chose to sell fewer shares rather than lower its valuation. A lower valuation would make this a "down round," selling shares at a lower price than in the previous raise, which would hit the value of stakes held by existing shareholders and employees. Raising less money avoids that outcome.

But the cut in volume tells its own story. It suggests there were not enough buyers willing to take $30 billion worth of stock at a $1.25 trillion price. In private markets, prices rise when buyers are plentiful. When they are scarce, the adjustment comes through volume, as it appears to have here.

Based on earlier reporting, we had been tracking this round as "up to $30 billion at $1.25 trillion," with a deadline of October 30. The latest report came out the day after that deadline. It is not yet known how many commitments were signed by the deadline, or whether the deadline was extended.

The same week public markets fell

The report coincided with a week in which listed AI stocks sold off. The Nasdaq fell two days in a row, by 1.4% and 3.6%. Bloomberg's headline links the lower funding target to the drop in AI stocks.

Listed shares are priced every day, but private shares are priced only when a company raises money. Private markets therefore tend to cool later than public ones. If the stock selloff has now reached private fundraising targets, the market chill is beginning to reach frontier labs that are not publicly traded.

Competition for capital is also intensifying. Anthropic filed an S-1 on October 26 and is preparing to go public. An S-1/A with a price range and share count is expected around November 10. Investors who want exposure to frontier labs will soon be able to choose between a privately held OpenAI and a soon-to-be-listed Anthropic.

What it means

OpenAI has so far backed its large compute commitments with money raised from outside investors. Many of its data center, chip and cloud contracts commit it to payments years into the future. Those commitments assume that each funding round brings in the planned amount.

The report that commitments stopped at about $11 billion is the first time that assumption has been called into question with a concrete number. Still, $11 billion remains an enormous amount for a single private placement. It would be going too far to read this as OpenAI being short of money. What can be said is that demand has a ceiling. Only so many buyers want in at a $1.25 trillion price, and this time that ceiling sat below $30 billion.

What we don't know yet

• Who committed: The names of the investors behind the roughly $11 billion, and how much each is putting in.
• OpenAI's response: Whether OpenAI responded to the reports could not be confirmed from the sources cited here.
• The remainder: Whether OpenAI will extend the deadline to raise the roughly $9 billion gap to $20 billion, or take a different approach.
• Terms: Whether OpenAI kept the valuation unchanged but gave buyers concessions such as liquidation preferences. Even if the headline valuation stays the same, changed terms alter the effective price.
• Next week's earnings: Whether earnings from Palantir (November 2), AMD and Super Micro (November 3), and Arm and Qualcomm (November 4) halt the AI selloff. If they don't, the remaining roughly $9 billion will be even harder to raise.