OpenAI cuts fundraising target to $20 billion amid AI valuation concerns

OpenAI is seeking to raise up to $20 billion in a new funding round, down from a previous target of up to $30 billion. The company is aiming for a post-money valuation of $1.25 trillion, according to a report by the Financial Times. A person directly familiar with the deal told CNBC that the figures remain subject to change because the round has not yet closed.

Investors from the United Arab Emirates are leading the round alongside the asset management firm Coatue. The Financial Times reported that OpenAI set a Friday deadline for investors to commit their capital. Some investors chose to lower their allocated amounts during the final stages of the process. OpenAI did not immediately respond to a request for comment on the reduced target.

The decision to slash the funding goal follows a week of scrutiny regarding the profitability of artificial intelligence infrastructure spending. Major technology firms have invested heavily in data centers and graphics processing units to meet demand, but recent financial results have raised questions about returns. Investors grew concerned after several tech giants issued capital expenditure figures that fell short of analyst estimates.

Market sentiment shifted sharply on Friday when AI-linked stocks declined. Intel shares dropped 25% following weak revenue guidance. Micron Technology fell 5.5%, and Nvidia lost 4% of its value. Alphabet experienced its worst trading day in history on Thursday after search revenue missed expectations. Philipp Schindler, the company's chief business officer, attributed part of the search impact to lower monetization within the company's AI Mode. Amazon and Microsoft also issued spending forecasts that came in below expectations.

The reduction in OpenAI's fundraising target occurs against a backdrop of heightened sensitivity to capital efficiency in the AI sector. The company's ability to close the round at the revised valuation will depend on investor confidence in the long-term financial viability of large-scale AI deployment.