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OpenAI has completed a deal to help employees sell shares in the company at a $500 billion valuation, propelling the ChatGPT owner past Elon Musk’s SpaceX to become the world’s largest startup.
Current and former OpenAI employees sold about $6.6 billion of stock to investors including Thrive Capital, SoftBank Group Corp., Dragoneer Investment Group, Abu Dhabi’s MGX and T. Rowe Price, Bloomberg reported.
That boosted the US company’s price tag well past its previous $300 billion level during a SoftBank-led financing round earlier this year.
That rapid rise underscores the investment frenzy surrounding the leaders of a technology with the potential to transform industries and economies.
Sam Altman’s OpenAI is one of several companies including Nvidia Corp. now leading a global push to build data centers and develop artificial intelligence services, an undertaking that’s expected to cost trillions of dollars.
Though it has yet to turn a profit, the US startup is helping fuel that infrastructure boom by inking mega-sized deals with the likes of Oracle Corp. and Nvidia.
The deal vaults OpenAI past SpaceX’s $400 billion valuation.
That milestone coincides with a pivotal time for Altman’s company, which is in negotiations with Microsoft Corp. to convert into a more traditional for-profit company.
OpenAI was founded in 2015 as a nonprofit dedicated to advancing digital intelligence “in the way that is most likely to benefit humanity as a whole.”
Planned changes will give the existing OpenAI nonprofit entity control over a new public benefit corporation.
Both Altman and Musk, who were OpenAI co-founders, have spoken about the potential existential risk to humans posed by AI.
Yet they’ve since fallen out: Musk has sued to try and stop the overhaul, accusing OpenAI of forsaking promises to him when he helped to create the nonprofit.
He claims it abandoned its founding purpose when it accepted billions of dollars in backing from Microsoft starting in 2019, the year after he left OpenAI’s board.
OpenAI faces an increasingly competitive market for AI talent as big tech firms jockey for the resources they need.
A secondary sale could help OpenAI incentivize staff to stay at the company and turn down those lavish compensation offers.
Major US startups often negotiate share sales for their employees as a way to reward and retain staff, and also attract external investors. OpenAI is looking to leverage investor demand to provide employees with liquidity that reflects the company’s growth.
The value of a company tied to a secondary share sale is separate from the traditional private market valuation set when a startup completes a new round of funding.
The total amount of eligible units sold in the secondary fell short of the $10 billion-plus worth of stock that the company allowed for sale.
That could mean current and former employees are demonstrating confidence in the long-term viability of the business.
In the long run, OpenAI faces mounting competitive pressure from rivals such as Google and Anthropic, which is also raising capital at a rapid clip. In response, OpenAI has embarked on a spate of recent technology product launches.
OpenAI released its most powerful GPT-5 model in August, aimed at shoring up its lead in an increasingly crowded sphere.
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