Openai has reached a new milestone: a $500 billion valuation, making it the most valuable private company in the world, surpassing Elon Musk’s SpaceX and widening the gap with other major private companies such as its direct competitors, Humans and Tiktok Parent bytentance.
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 foundation to the company but boosted its valuation from $300 billion in March, when it raised $40 billion in a round led by SoftBank.
Founded in 2015, Openai is a nonprofit organization dedicated to advancing AI for humanity, but later adopts a restricted interest structure. The company currently has approximately 700 million users per week and $12 billion in annual revenue. It has signed some of the largest cloud deals, including a $300 billion partnership with Oracle for computing the next five years.
The company is also in a long-term transition to a for-profit structure. Last month, it signed a non-binding agreement with its largest shareholder Microsoft to convert its for-profit institutions into public welfare companies controlled by the remaining non-profits.
Elon Musk left Openai in 2018 and went on to start his own startup Xai, which has since become one of the company’s most intense critics. He filed several lawsuits to stop its restructuring and accused the company of breaking away from its inception mission to support profits. Recently, he sued the company allegedly employed former employees of Xai, who claimed to have stolen trade secrets.
Secondary stock sales gain steam
Secondary stock sales are an increasingly popular way to retain and reward employees in a startup that raises the valuation of several already very valuable companies. After a round of secondary share sales, SpaceX reached a valuation of $400 billion in July; Stripe’s February bid price was worth $91.5 billion; Databricks’ December second sale gave the company a valuation of $62 billion.
As Openai’s tools continue to weave into everyday life, the company has to consider its rapid rise in social consequences. Earlier this month, it introduced parental control for Chatgpt, giving parents options such as restricting their children’s exposure to sensitive content or disabling certain voice and image modes. The feature comes after being sued by a teenager in August, who provided suicide after he committed suicide on Chatgpt.
Recently, Openai has sparked the launch of Sora, a short form of AI video app that has drawn criticism that consumer-facing products conflict with their higher goals of scientific advancements and artificial universal intelligence (AGI). Altman made a criticism on X yesterday (October 1): “Showing people new technologies/products that are cool all the way, making them smile and hoping to make money, and it’s also great given all the compilation needs.”
He added that most Openai resources are focused on science and AGI research. “When we launched ChatGPT, there were a lot of ‘who needs this, where is Aji?’ For the best trajectory of the company, the reality is nuanced,” he wrote.
