Anamika Dey, editor
Brief news
- OpenAI has secured a $4 billion revolving line of credit, boosting its total liquidity to over $10 billion, following a successful financing round valuing the company at $157 billion.
- The company aims to use these funds for infrastructure expansion, talent acquisition, and research investments, while also facing challenges like executive departures and significant operational costs.
- OpenAI’s revenue surged to $300 million last month, with projections of $11.6 billion for next year, despite anticipated losses of $5 billion this year due to increased GPU purchases.
Detailed news
Bringing OpenAI’s total liquidity to more than $10 billion, CNBC has reported that the company has a revolving line of credit worth $4 billion. Following the announcement on Wednesday that OpenAI had successfully completed its most recent financing round at a value of $157 billion, which includes the $6.6 billion that the business had raised from a large number of investment firms and other technology companies, this news comes as a pleasant surprise.
JPMorgan Chase, Citi, Goldman Sachs, Morgan Stanley, Santander, Wells Fargo, SMBC, UBS, and HSBC all participated.
The base credit limit is $4 billion, with the potential to enhance it by an additional $2 billion. It is possible to access the loan over the course of three years, and it is unsecured. OpenAI’s interest rate is equivalent to the Secured Overnight Financing Rate (SOFR) plus 100 basis points. As of early this week, the cost of borrowing currency overnight, known as SOFR, was just over 5%. This implies that OpenAI would be paying approximately 6% on the money it borrows immediately.
In a blog post published on Thursday, OpenAI stated, “This means we now have access to over $10 billion in liquidity, which gives us the flexibility to invest in new initiatives and operate with full agility as we scale.” The company intends to utilize the funds to expand infrastructure, attract talent, and invest in research and products. “It also serves to reinforce our partnership with a distinguished group of financial institutions, a significant number of which are also OpenAI customers.”
An exhaustive roster of investment firms and major technology companies participated in OpenAI’s most recent funding round. The investment was spearheaded by Thrive Capital, which intended to allocate $1 billion. Other investors included Microsoft, a current supporter, and Nvidia, a semiconductor manufacturer. According to sources with knowledge of the situation, SoftBank, Khosla Ventures, Altimeter Capital, Fidelity Management & Research Company, MGX, and Tiger Global also participated.
The tech industry has been captivated by OpenAI’s meteoric rise, which commenced with the release of ChatGPT in late 2022. This development has brought the concept of generative artificial intelligence into the mainstream and has facilitated the allocation of tens of billions of dollars to AI infrastructure. OpenAI’s valuation is reported to have increased from $29 billion in 2023 to $80 billion earlier this year.
CNBC confirmed last week that OpenAI generated $300 million in revenue last month, a 1,700% increase from the start of the previous year, as reported by The New York Times. According to an individual who is affiliated with OpenAI and requested anonymity due to the confidentiality of the financials, the organization anticipates generating $11.6 billion in revenue next year, a significant increase from $3.7 billion in 2024.
However, the cost of this revenue is exorbitant, as OpenAI is required to increase its purchases of Nvidia’s graphics processing units (GPUs) in order to train and operate its large language models. According to the individual, the organization anticipates incurring losses of approximately $5 billion this year. Microsoft is a critical ally in the expansion of its Azure cloud business and has invested billions of dollars in OpenAI.
Additionally, OpenAI has encountered numerous challenges in recent months, such as the departure of influential executives. This trend persisted last week with the departures of CTO Mira Murati, research chief Bob McGrew, and research VP Barret Zoph.
Last Thursday, OpenAI convened an all-hands meeting in response to the board’s decision to contemplate a for-profit business restructuring. A source with knowledge of the situation stated that the nonprofit segment would continue to operate as a distinct entity in the event of the change.
A person who was present at the meeting stated that Altman denied reports of intentions for him to acquire a “giant equity stake” in the company, stating that the information was “just not true.”
Bret Taylor, the Chairman of OpenAI, stated in a statement to CNBC last week that the board has discussed the matter, but no specific figures are currently being considered.
Taylor stated, “The board has engaged in discussions regarding the potential benefits to the company and our mission of compensating Sam with equity. However, no specific figures have been discussed, and no decisions have been made.”
Source CNBC News
