WSJ Report: OpenAI Could Confidentially File for an IPO as Soon as Friday. Here's What Investors Need to Know

IPO season is kicking into high gear.

Recently, the artificial intelligence semiconductor company Cerebras went public and skyrocketed out of the gate. SpaceX just released its preliminary prospectus, with the company reportedly targeting a June 12 IPO.

Now, OpenAI, the parent company of ChatGPT, could confidentially file for an IPO as soon as Friday, according to The Wall Street Journal, which cited "people familiar with the matter."

The Journal didn't say that OpenAI would file on Friday; it just said it could. Sources the publication spoke with said that OpenAI and its CEO, Sam Altman, want the company to be ready to go public as early as September of this year.

The news comes after a federal jury ruled in Altman's favor in a hotly contested lawsuit filed by Elon Musk, who alleged that OpenAI improperly transitioned from a nonprofit to a for-profit entity after Musk donated $38 million to OpenAI between 2015 and 2017.

Musk, who sued the company for $150 billion, sought to remove Altman from the board of directors and revert the company back to its original nonprofit status.

Ultimately, the jury dismissed the lawsuit on the grounds that Musk waited too long to file the suit. Removing the overhang of the lawsuit makes OpenAI's path to an IPO easier, although many questions remain.

Here's what investors need to know.

Image source: Getty Images.

Why OpenAI may want to do an IPO sooner rather than later

The release of ChatGPT four years ago officially kicked off the AI craze that the world now finds itself in. ChatGPT also became the fastest-growing consumer app of all time, reaching 100 million weekly active users in just two months.

Earlier this year, OpenAI disclosed that it had 700 million active weekly users.

But the company is also in a much more complex situation than it was when it first launched. AI consumes an incredible amount of power, which is why all of the largest AI companies are spending hundreds of billions to build out infrastructure, such as data centers, to support the AI revolution.

OpenAI has supposedly committed $1.4 trillion over the next seven to eight years to data centers with various companies.

There have been concerns about how the company will fund this. In March, OpenAI closed a $122 billion private financing round that valued the company at $852 billion.

One might have thought this would give the company more runway before an IPO. However, media reports surfaced that the company was struggling to meet internal revenue targets.

There have also been broader concerns about AI valuations and whether current spending on AI infrastructure and demand can continue at the current clip. OpenAI may be thinking it wants to at least have the flexibility to conduct an IPO this year in case it senses that AI momentum is running into a wall or valuations take a hit.

Prior media reports have suggested the company could look to target a $1 trillion valuation. Reuters reported last October that the company could look to raise $60 billion at the low end, but I would think that number would be much higher after having just completed a $122 billion round.

Other questions investors should think about

OpenAI's CFO Sarah Friar said in January that the company hit an annualized revenue run rate of $20 billion last year, up from $6 billion in 2024, with growth closely tied to growth in compute capacity.

When the company will reach profitability is anyone's guess, but like other big AI IPOs, OpenAI is likely to trade at a high multiple.

Investors should start assessing the IPO by looking for information that answers, or at least provides insight into, a few key questions.

If OpenAI does file for an IPO, why now? Can the company keep growing revenue as it has and reach profitability, given the current competitive environment? Can OpenAI raise enough capital and reach a financial position where it can fund all of its capital commitments?

This will be pivotal information for how investors perceive the IPO and the company's positioning.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.