OpenAI's $30 billion funding ambition shrinks to $20 billion: What's worrying investors?

OpenAI has cut its latest fundraising target by $10 billion and is now seeking $20 billion at a $1.25 trillion valuation, the Financial Times reported. The company had previously aimed to raise $30 billion at a $1.4 trillion valuation.

ChatGPT-maker OpenAI has reportedly pared down its funding round by $10 billion to $20 billion for valuation of $1.25 trillion, according to a report by the Financial Times.

This is a reduction from the previous target of raising $30 billion for a valuation of $1.4 trillion, as per a Reuters report.

It added that the Sam Altman led AI startup has slashed the funding round target to complete the process before Anthrpic's IPO so as to make the most of a largely similar investor base.

Cut in funding raise: What is worrying investors?

Reuters noted that US tech stocks fell amid worries over AI spending by tech companies — the Nasdaq index slumped 2.9% on Friday, down 7.8% from its all-time closing high on 6 October.

According to a report by Traders Union, investors are becoming less enthusiatic about large, private deals for artificial intelligence companies. Further, there is competition from rival Anthropic's initial public offering (IPO) and also increased scrutiny over AI spending, it added.

Sources told the publication that OpenAI was set to pull less than the reduced $20 billion target at Friday's deadline for commitments as some investors slashed their allocations.

Notably, the worries are sector wide. S&P Global Ratings on Friday downgraded Meta's AA- credit rating to Negative, in an “early step” amid growing pressure from the tech giant's increased artificial intelligence (AI) related expenditures, Bloomberg reported.

Who are expected to participate?

The largest partcipant is expected to be a UAE consortium, which includes the Arab state-backed MGX. The deal allows the startup option to lease new computing power in the Gulf region, it said.