A secondary share sale propelled OpenAI’s valuation, setting a new record for private companies. The Washington Post via Getty Images
OpenAI has reached a new milestone: a $500 billion valuation that makes it the world’s most valuable private company, surpassing Elon Musk’s SpaceX and widening the gap with other major private companies like its direct competitor, Anthropic, and TikTok parent ByteDance.
The staggering valuation follows a secondary shares sale, first reported by Bloomberg, that allowed current and former employees to sell stock to investors, including Thrive Capital, SoftBank, Dragoneer Investment Group, MGX and T. Rowe Price, The sale didn’t bring new funding to the company but boosted its valuation from $300 billion in March, when it raised $40 billion in a round led by SoftBank.
OpenAI was founded in 2015 as a nonprofit dedicated to advancing A.I. for humanity’s benefit, but later adopted a capped-profit structure. The company currently has about 700 million weekly users and $12 billion in annualized revenue. It has signed some of the largest cloud deals, including a $300 billion partnership with Oracle for computing power over the next five years.
The company is also in the midst of a long-anticipated transition to a for-profit structure. Last month, it signed a non-binding deal with Microsoft, its largest shareholder, to convert its for-profit arm into a public benefit corporation controlled by the remaining nonprofit.
Elon Musk, who left OpenAI in 2018 and went on to launch his own startup, xAI, has since become one of the company’s fiercest critics. He has filed multiple lawsuits aimed at halting its restructuring and accused the company of straying from its founding mission in favor of profits. Most recently, he sued the company for allegedly hiring former xAI employees who he claims stole trade secrets.
Secondary share sales gain steam
Secondary share sales, an increasingly popular method among startups to retain and reward staff, have boosted the valuation of several already highly valued companies. SpaceX reached a $400 billion valuation in July after a round of secondary share sales; Stripe’s February tender offer valued it at $91.5 billion; and Databricks’ December secondary sale gave the company a $62 billion valuation.
As OpenAI’s tools continue weaving into daily life, the company has had to reckon with the social consequences of its rapid ascent. Earlier this month, it rolled out parental controls for ChatGPT, giving parents options such as limiting their children’s exposure to sensitive content or disabling certain voice and image modes. The feature came after OpenAI was sued in August by the parents of a teenager who committed suicide after ChatGPT allegedly gave him self-harm advice.
More recently, OpenAI sparked backlash with the launch of Sora, a short-form A.I. video app, drawing criticism that consumer-facing products conflict with its loftier goals of scientific advances and artificial general intelligence (AGI). Altman addressed the criticism on X yesterday (Oct. 1), writing: “It is also nice to show people cool new tech/products along the way, make them smile, and hopefully make some money given all that compute need.”
He added that most of OpenAI’s resources remain focused on science and AGI research. “When we launched ChatGPT, there was a lot of ‘who needs this and where is AGI?’ Reality is nuanced when it comes to optimal trajectories for a company,” he wrote.
