ChatGPT’s creator, OpenAI, has quietly submitted a request for an initial public offering (IPO), as announced in a blog post on Monday. This announcement follows closely on the heels of its competitor, Anthropic, which also filed for its IPO, intensifying the rivalry in the AI sector.
Valued recently at $852 billion post-money, OpenAI has lodged a draft registration statement with the U.S. Securities and Exchange Commission for its anticipated IPO, though no details regarding share quantity or pricing have been disclosed.
This filing indicates that the upcoming year could see a surge of activity in the public markets, especially with SpaceX also preparing to launch its IPO at a projected valuation of $1.75 trillion.
Despite its IPO aspirations, OpenAI has recently fallen short of its targets for user growth and revenue, as reported by The Wall Street Journal. CFO Sarah Friar has voiced concerns about OpenAI’s ability to manage its substantial expenditures on data centers, which are expected to remain high.
In March, OpenAI raised $122 billion in a record-setting funding round, with $3 billion gained directly from retail investors. However, the firm anticipates that its expenses for computing resources could match the size of that fundraising round by 2028, projecting a staggering $85 billion in losses that year, even with heightened sales, as reported by The Wall Street Journal. Positive cash flow is not expected until 2030.
SpaceX’s AI expenditure, while lesser, showcases how training expansive language models often incurs more costs than the revenue they generate.
In contrast, Anthropic has painted a more optimistic financial picture, indicating it is close to achieving its first quarterly profit. However, it has also recently secured a $65 billion funding round and anticipates acquiring another $36 billion in chip-focused debt, indicating a possibly significant burn rate.
The confidential nature of OpenAI’s IPO submission allows the company to prepare for its public offering without revealing sensitive financial details or business risks, which explains the absence of stock pricing or fundraising estimates thus far. Nevertheless, secondary markets are shedding light on investor sentiments regarding valuations.
Recently, Anthropic reached a valuation of $1 trillion on Forge Global, a secondary market platform, eclipsing OpenAI’s valuation, which stood around $880 billion in April.
David Shapiro, founder and CEO of OpenVC, who manages the NYSE OpenVC 500 Index tracking large public and private U.S. firms, noted that Anthropic’s valuation growth this year has outpaced OpenAI’s—an increase of 123% year-to-date compared to OpenAI’s 11.3%. Despite this trend, there remains investor interest in OpenAI’s shares.
“From a secondary investor standpoint, OpenAI had already grown into a significant portion of its valuation,” Shapiro told ToolsMixAi. “We haven’t seen OpenAI crater or anything close, and valuation is still enormously successful, according to the index.”
He also mentioned that OpenAI’s stock recently saw a minor uptick, signifying that investors may view both firms as contenders in the evolving landscape of large language model development.
The competition to reach the public markets is heating up. Experts warn that the first company to launch its IPO could attract a larger share of the increasingly limited capital available to AI companies, especially with much of the funding expected to be directed toward SpaceX’s impending IPO.
Moreover, disclosures from Anthropic’s filing could influence how OpenAI structures its own offering, with some analysts considering OpenAI’s current valuation as inflated in relation to its financial fundamentals.
Founded in 2015 as a nonprofit research organization, OpenAI disrupted the AI landscape with its launch of ChatGPT in 2022, leading to significant advancements in large language models across the sector.
While OpenAI has broadened its suite of offerings to serve both enterprise and government clients, it maintains a strong reputation for focusing on consumer needs more so than rival Anthropic. The company has achieved substantial scale, boasting around 900 million weekly active users.
OpenAI’s IPO momentum follows various internal challenges. In 2022, the board controversially removed Altman due to transparency issues and concerns regarding adherence to the firm’s mission. Altman was quickly reinstated, while several conspirators from the coup, including co-founder Ilya Sutskever, exited shortly after.
Recently, OpenAI has been embroiled in multiple lawsuits, including one by the state of Florida, accusing the company and Altman of endangering children through harmful information dissemination. This lawsuit adds to a series of claims against OpenAI connected to user-related crises, including delusions and incidents of self-harm and violence.
Last month, OpenAI found itself in court after Elon Musk, its co-founder and rival, sued the firm and Altman over alleged violations of earlier commitments to maintain its nonprofit status. The lawsuit was dismissed after a ruling determined Musk had exceeded the statute of limitations in filing.
Additionally, OpenAI has faced backlash after its president, Greg Brockman, and his wife each contributed $12.5 million to the political action committee Leading the Future, aimed at countering local political efforts for AI regulations. These donations also extended to MAGA Inc., the pro-Trump super PAC. OpenAI has attempted to clarify that these were personal contributions not sanctioned by the company.
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