OpenAI, the artificial intelligence (AI) pioneer, is facing headwinds as its revenue growth slows, its cash burn climbs, and its fundraising hits a roadblock. These pressures come amid persistent fears that the AI bubble is about to burst.
OpenAI Raised Just $11 Billion at a $1.25 Trillion Valuation
OpenAI’s latest fundraising fell short of its target, a sign that investors are questioning its valuation as evidence mounts that its business is decelerating. The company raised $11.5 billion, lifting its valuation to $1.25 trillion, well below the $1.4 trillion it was targeting. By contrast, Anthropic is eyeing a $2 trillion valuation in its IPO.
OpenAI’s fundraising comes at a difficult time for the company. Its cash burn is continuing, with estimates showing it will incinerate more than $280 billion through 2030. At the same time, its annualized revenue is below $50 billion, short of the $70 billion analysts were expecting. Competition from Meta Platforms (NASDAQ:META) and open-weight models like DeepSeek and Kimi has also intensified.
OpenAI has also delayed its IPO from this year to 2027. While management has cited AI safety concerns, the reality is that it is worried about its fundamentals. It fears that, as things stand, a listing would likely trigger a sharp selloff in its stock.
The fundraising also comes at a time when investors are pushing back against AI valuations. Firmus, an Australian company, recently pulled its IPO as investors pushed back against its valuation. Most AI companies, including hyperscalers like Alphabet, Meta Platforms, and Amazon, have all plunged in the past few weeks.
At the same time, some popular figures have warned about the AI bubble. These include Citadel’s Ken Griffin and Bridgewater Associates’ Ray Dalio.
ChatGPT has Lost Market Share
The fundraising also comes at a time when ChatGPT’s market share has continued falling this year. Its share dropped below 50% for the first time ever. Since then, other companies have continued to gain share in the US and internationally.
Anthropic’s Claude has become one of the fastest-growing players in the industry. In its S1, the company said that its revenue soared to over $16.8 billion in the first half of the year from $1.6 billion in the same period last year. Moonshot’s Kimi, Google’s Gemini, and Meta’s Muse have also grown.
OpenAI is taking actions to boost its business ahead of its IPO. It has slashed prices of its models, introduced advertising, and released more advanced models.
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