OpenAI cuts funding target to $20B, valuation to $1.25T

OpenAI has lowered its sights for its latest funding round. The ChatGPT maker cut its target by $10 billion to about $20 billion, the Financial Times reported, citing people familiar with the matter. Reuters picked up the report and CNBC published it on Saturday. The valuation OpenAI is aiming for reportedly dropped to $1.25 trillion, down from $1.4 trillion.

What the report says

According to the FT, OpenAI gave investors a Friday deadline to commit. The "first close" of the round is now expected to raise less than $20 billion, after some investors reduced their allocations.

The largest participant is expected to be a consortium of investors from the United Arab Emirates that includes the state-backed technology fund MGX. As part of that deal, OpenAI would get the option to lease newly built computing capacity in the region. Venture firms Founders Fund, Coatue, Sequoia Capital and Andreessen Horowitz are also expected to take part. Wealthy individuals would later be able to invest through a separate retail offering at the same $1.25 trillion valuation, the report says.

OpenAI, MGX, Coatue, Sequoia and Andreessen Horowitz did not immediately respond to Reuters' requests for comment.

Why it is happening now

The smaller round comes during a sharp sell-off in US tech stocks driven by doubts about the huge sums being spent on AI. The Nasdaq fell 2.9% on Friday and is 7.8% below its record close of October 6, according to the report.

Timing matters for another reason. OpenAI is preparing to go public in 2027, and Reuters has reported that the company wanted to close this round ahead of Anthropic's expected listing, because both companies are courting a similar pool of investors.

What it means for users

Nothing changes in ChatGPT today. But money decides how fast AI companies can build data centres and how aggressively they can price their services, so a tighter round is a signal worth watching. Investor caution is also one reason cheaper, self-hosted alternatives keep attracting attention; our explainer on open-weight AI models covers how they differ from ChatGPT. If you use ChatGPT daily, it is also a good moment to review ChatGPT's privacy settings.

The figures come from an unconfirmed press report; OpenAI has not commented publicly on the size of the round.