OpenAI hits $850B IPO valuation as $120B raise coincides with SpaceX listing plans

OpenAI just got even bigger in the private market. The company is adding another $10 billion to its fundraising haul, taking the total to more than $120 billion, chief financial officer Sarah Friar told Jimmy Cramer on Tuesday.

The timing is hard to miss. OpenAI is pulling in fresh cash while SpaceX gets ready for what could be one of the biggest stock market debuts ever. From Silicon Valley to Wall Street to London, investors are scrambling to get exposure to both companies.

The latest financing also adds to the pressure around Sam Altman and Elon Musk, who now sit at the center of the two hottest capital stories in tech and private markets.

OpenAI brings in another $10 billion and gets closer to an IPO

Sarah said the new $10 billion commitment includes Andreessen Horowitz, D.E. Shaw Ventures, MGX, TPG, and T. Rowe Price. Microsoft is also taking part in this new slice of the round.

That matters because Microsoft has been one of OpenAI’s most important backers for years and remains one of its main sources of computing power.

Sarah described Microsoft as “an incredible partner” and said chief executive Satya Nadella was “there early.” She also said the new raise brought in money from across the full investor landscape. “What I’m really pleased about is we raised money all around the ecosystem,” Sarah said.

She pointed to participation from venture capital firms, private equity firms, mutual funds, and sovereign entities. She added, “It didn’t matter where you went, people really believed in this AI revolution and they wanted to put their money to work behind it.”

This update came about a month after OpenAI announced the first leg of the round in late February. At that stage, the company said it had raised $110 billion at a $730 billion pre-money valuation.

In that earlier round, Amazon committed $50 billion, while Nvidia and SoftBank each put up $30 billion. Amazon also signed a multi-year partnership with OpenAI to build custom models for customer-facing uses.

On top of that, OpenAI said it would expand its existing $38 billion agreement with Amazon’s cloud unit by another $100 billion over the next eight years.

When Cramer asked about a possible public offering, Sarah said OpenAI is “starting to build that outcome.” She then laid out the company’s thinking in plain terms:

“Over the long run, look, we have to build a company that’s ready to be a public company. This [funding] round derisks somewhat because we could be ready, but the market might not be ready for us. But I need to make sure the company is healthy and ready to face the public markets. We do view this as all part of an access journey.”

SpaceX lines up its filing as OpenAI cuts products and spending

While OpenAI keeps raising money, SpaceX is getting ready to test public demand. The Information reported that the company could file an IPO prospectus as soon as this week. The report said Elon’s company may try to raise more than $75 billion.

Earlier expectations had pointed to a summer offering of up to $50 billion with a valuation above $1.75 trillion. If the raise comes in above $75 billion, it would blow past the old IPO record set by Saudi Aramco, which raised $29.4 billion in 2019.

Back at OpenAI, the company is also changing how it spends. Last fall, Sam Altman talked up $1.4 trillion in long-term infrastructure commitments. That plan has now been cut back.

In February, OpenAI told investors it is now aiming for about $600 billion in total compute spending through 2030, a lower number that better fits its expected revenue growth.

The company is also shutting down Sora, the video product it launched with a lot of noise last year but that later faded from view. The shutdown is part of a broader effort to focus on business tools and coding products before a possible IPO as soon as the fourth quarter of this year.

On Tuesday, Sam told staff that OpenAI would wind down products built on its video models. That includes the Sora consumer app, a developer version of Sora, and video features inside ChatGPT.

Sarah said the reason is simple. “We just are facing a lack of compute,” she said when asked about Sora.

She added, “We’re having to make those really difficult decisions. I’ve talked about it to many investors. Often we hold back models, we don’t release features. And this was an example of having to prioritize. It doesn’t mean we won’t get back into areas of creativity. It’s not a ‘never.’ It’s just a, ‘We have to make hard choices.’”

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