In a significant development, SoftBank will invest $500 million in OpenAI as part of a larger funding round. Japanese telecom giant SoftBank’s Vision Fund will invest $500 million in OpenAI, as reported by The Information on September 30. This investment is part of a larger funding initiative in which OpenAI aims to raise $6.5 billion through convertible notes. The funding round values OpenAI at approximately $150 billion, pending certain corporate restructuring changes.
OpenAI is considering significant changes to its corporate structure. These modifications include removing the profit cap for investors and possibly transitioning into a for-profit entity. This move could mark a major shift for the company, which has primarily operated under a nonprofit model.
Reports indicate that SoftBank’s investment would be its first in OpenAI, though the company has previously backed competing AI firms. In June, SoftBank’s Vision Fund invested in Perplexity AI, valuing the AI search startup at $3 billion.
Leadership Changes and Uncertainty
SoftBank will invest $500 million in OpenAI, thus indicating a potential partnership between the two technology giants. The investment comes at a turbulent time for OpenAI. Recently, Mira Murati, the Chief Technology Officer, announced her departure. This exit adds to a series of leadership changes within the company this year. In addition, OpenAI has been under scrutiny after one of its social media accounts was compromised, leading to unauthorized posts promoting a fraudulent cryptocurrency.
Despite the turmoil, OpenAI’s potential restructuring and new funding could solidify its status as one of the world’s most valuable startups. Discussions are also ongoing to offer CEO Sam Altman a 7% equity stake, which would be his first ownership interest in the company.
Market Reactions
The news of the SoftBank investment caused shares of the company to rise by 3.4% on Tuesday morning. This uptick followed a broader selloff in Tokyo’s stock market after a leadership election within Japan’s ruling party.
SoftBank is committed to investing in AI technologies, focusing on both AI chips and Japan’s AI infrastructure. While OpenAI explores restructuring options, it remains focused on its mission to develop artificial intelligence that benefits society. The nonprofit arm of OpenAI is expected to continue alongside any new for-profit initiatives.
Apple Backs Out
In recent weeks, reports indicated that Apple was considering an investment in OpenAI, the developer of ChatGPT. However, it appears that Apple has decided not to move forward with this investment. Following Apple’s withdrawal, SoftBank will invest $500 million in OpenAI, filling the gap left by the tech giant.
Details of the Investment
According to The Information, this investment is part of a larger funding round that OpenAI is negotiating, which could total $6.5 billion. The funding is expected to value OpenAI at approximately $150 billion. This partnership would reunite OpenAI’s CEO Sam Altman and SoftBank’s founder Masayoshi Son. The two had previously discussed launching an AI chip business to compete with Nvidia, but those plans did not materialize.
SoftBank currently owns two British AI chip companies: Arm Holdings and Graphcore. The company attempted to sell Arm to Nvidia but was unsuccessful in that endeavor. In July, SoftBank acquired Graphcore, which focuses on developing advanced AI chips.
The upcoming funding round is likely to be led by Thrive Capital, with significant participation expected from Microsoft, which is OpenAI’s largest investor. Microsoft has already invested nearly $13 billion in OpenAI and is reportedly looking to contribute an additional $1 billion in this round.
A portion of the newly raised funds will be allocated to enhancing computing infrastructure, as stated by OpenAI’s Chief Financial Officer, Sarah Friar, in a leaked internal memo. Earlier this year, it was reported that OpenAI is collaborating with Microsoft to build a powerful AI supercomputer in the cloud, utilizing millions of chips to meet the growing computational demands of the organization.
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