The topic of artificial intelligence continues to hold its dominant position in the discussion, especially on Wall Street, where technology-focused companies focused on AI are seeing the biggest share price and valuation gains of the year. One such company making a splash in the industry is chipmaker Nvidia.
The enthusiasm for artificial intelligence is also generating considerable impact in the secondary market. According to the Wall Street Journal (WSJ), OpenAI, the parent company of ChatGPT, is looking to sell shares in an off-market transaction, with a valuation that ranges between $80 billion and $90 billion. This would represent a massive valuation boost of up to 200 percent.
The proposed deal is to allow existing shareholders to sell their shares instead of issuing new shares to generate additional capital. OpenAI has aspirations to sell hundreds of millions of dollars worth of shares to Silicon Valley investors.
In January, OpenAI was prominently featured in the media when Microsoft announced a significant investment in the company. At the time, Microsoft, the second most valuable corporation in the world after Apple, invested another $10 billion in the startup co-founded by Elon Musk in 2015. This was done at a valuation of OpenAI of $30 billion. Within nine months, the enterprise value of OpenAI, now 49 percent owned by Microsoft, would have tripled. Accordingly, Microsoft would expect a remarkable return on its investment in the double-digit billions.
OpenAI continues to grow at a rapid pace and is expected to generate revenues of more than $1 billion this year. According to the WSJ, that revenue is expected to grow to “many billions” by 2024. OpenAI’s valuation may seem impressive at first, but it reflects the general trend toward a run on AI stocks.
If OpenAI is indeed valued at $80 billion to $90 billion, it would make it one of the most valuable privately held companies, surpassed only by ByteDance, the parent company of TikTok, and Elon Musk’s space and telecommunications company SpaceX, which were valued at market caps of $225 billion and $137 billion, respectively, in their most recent financings.
In the AI industry, however, OpenAI also faces growing competition. For example, Amazon recently announced it would invest $4 billion in AI startup Anthropic, which is developing Claude and Claude 2, direct competitors to ChatGPT. Google, Meta and Apple are also stepping up their efforts in the AI space. The determination of who will ultimately win the race has yet to be made.
