OpenAI Nears $1.25 Trillion Valuation. What That Tells Investors Ahead of a Potential 2027 IPO.

While rival Anthropic is preparing to go public as soon as November, OpenAI is on the verge of closing another funding round.

The ChatGPT parent is about to raise $30 billion at a valuation of $1.25 trillion with investors from the United Arab Emirates and Coatue, an investment firm, leading the round.

Discussions of a new funding round began in September when OpenAI was approached by investors.

The funding round has several implications both for OpenAI and the broader AI sector.

Image source: Getty Images.

OpenAI scales back its ambitions

OpenAI had initially aimed for a $1.5 trillion valuation in the capital raise, and the lowered valuation could be another sign of fatigue in the AI sector, following the plunge in CoreWeave stock and Meta's sell-off after it reported negative free cash flow in its earnings report.

However, the valuation is still significantly higher than the $852 billion it fetched in the spring, so it shouldn't be a cause for alarm.

$30 billion is less than the company raised in its last round, but it's still a significant sum, and if it eases its path to an IPO, it seeems like a smart move.

It also underscores that OpenAI has fallen behind Anthropic, which is targeting a $2 trillion valuation when it goes public next month. OpenAI CEO Sam Altman has told his employees that now is not the right time for the company to go public, but it's still targeting an IPO in 2027.

Going public at the same time as Anthropic would be a mistake, and it makes sense for OpenAI to wait a few months for investors' appetites to rebuild for another blockbuster IPO.

What it means for AI stocks

The new funding round is a positive data point for AI stocks at a time when they could really use one.

The future of the AI sector ultimately hinges on the success of Anthropic and OpenAI, the two leading AI labs that are delivering the technology that has come to be known as "AI." Both of these companies will need to eventually be profitable in order for the valuations across the AI ecosystem and for OpenAI and Anthropic to make sense.

After all, the four major hyperscalers are set to spend upwards of $700 billion on capital expenditures to fund AI infrastructure. There's never been an investment cycle this big. That money is being spent so businesses and consumers can use generative AI and related programs from Anthropic, OpenAI, and others. Whether those companies get a return on that investment depends on how rapidly the AI labs grow and how quickly they turn a profit.

The big test will come from Anthropic's IPO. The company filed confidentially to go public last month, and is expected to complete its IPO in November.

If Anthropic can achieve its $2 trillion valuation and the stock bounces higher like Space Exploration Technologies did, we could see a rebound in AI stocks. We'll learn more once the company files its S-1 prospectus, which includes its complete financial reports.

Jeremy Bowman has positions in CoreWeave and Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.