OpenAI is reportedly in talks with Thrive Capital to raise billions at a valuation few companies have ever come close to: $103 billion.
If the valuation comes to fruition, it will be the fifth VC deal ever, and second for any US company, to break the $100 billion post-money valuation threshold, according to a PitchBook analysis. But history has shown that such ambitious price tags can be hard to defend.
A $100 billion-plus valuation is a rare beast: Most companies will go public long before they reach the financial milestones expected at such a price.
OpenAI’s revenue growth is on an impressive trajectory—the AI company is on track to hit over $3 billion in annualized revenue in 2024, The Information reported in June. But even though OpenAI is undoubtedly one of the companies behind the AI boom generating the most cash, it’s still an extreme revenue-to-valuation multiple. By way of comparison, in 2022, the same year that Shein raised at a $100 billion valuation, the fast fashion retailer reportedly brought in $30 billion in revenue.
OpenAI did not respond to a request for comment.
OpenAI is setting its valuation in what may prove to be an AI bubble. VCs and corporations have funneled tons of capital into competing large language models, which require major capital injections to keep up with the high cost of purchasing GPU clusters and training their models.
The $100 billion ceiling has been broken by Elon Musk’s SpaceX, TikTok owner Bytedance, Chinese ecommerce giant Shein and Alibaba affiliate Ant Group. A few other companies, like fast-growing fintech Stripe, have also sold secondary shares at valuations over $100 billion, but have yet to do so in a private financing round.
These lofty price tags are underpinned by skyrocketing growth that can be challenging to sustain.
Shein, for example, raised at a $100 billion valuation in 2022 led by General Atlantic following years of aggressive growth in the fast fashion market.
But like much of the industry, the ecommerce giant ran into headwinds in the market downturn, and early investors were selling shares on the secondary market at heavy discounts before the company took a down round at a 34% discount in 2023. Shein subsequently confidentially filed for a London IPO at a $63 billion valuation.
Ant Group’s valuation peaked at a reported $150 billion valuation in a 2018 financing round. The Chinese government mounted a regulatory crackdown on its tech and finance industries that derailed Ant’s planned IPO in late 2020. Last year, Ant held a share buyback at a $78.5 billion valuation.
Related read: US VC Valuations Report
Featured image of OpenAI CEO Sam Altman by Patrick T. Fallon/Getty Images
