BofA grants OpenAI $520 million loan,ahead of IPO

The Bank of America has offered a $520 million credit line to OpenAI, with the ChatGPT maker preparing to go public in an IPO. This move pulls one of Wall Street’s largest institutions deeper into the business of financing AI.

This hands the Bank of America a foothold in what could become one of the biggest listings ever, and also signals that a historically cautious bank now sees AI startups as worth the financial risk.

Bank of America makes a U-turn

Bank of America, run by CEO Brian Moynihan, had kept its distance from AI startups because a lot of them kept losing money. However, increased competition in the AI financing sector has changed this.

OpenAI had already pulled in more than $5 billion from other financiers, and the bank has calculated that sitting out meant potentially losing access to an IPO that could feed its Merrill Lynch wealth-management arm.

The bank is also a huge player in the happenings on Wall Street. It carries a $3.5 trillion balance sheet, holds the second-largest deposit share in the United States, and trades at a market cap of about $424 billion.

OpenAI IPO positioning

Since last year, the Bank of America has helped to raise almost $500 billion for AI-related companies. According to Reuters, this figure accounts for 60% of all of that type of fundraising across leveraged finance, investment-grade debt, and equity capital markets. Reuters also reported that the bank was weighing advisory roles in the IPOs of both OpenAI and its rival Anthropic.

The Bank of America worked as one of the bookrunners on SpaceX’s public listing and ran the IPO’s US retail distribution. Elon Musk’s rocket and AI company debuted in June at a valuation above $2 trillion, which remains the largest IPO on record.

OpenAI filed confidentially for a US listing last month and is targeting a valuation above $1 trillion, although the company has reportedly considered delaying the offering.

The smartest crypto minds already read our newsletter. Want in? Join them.