AI Jitters Hit Private Markets: Will OpenAI's Smaller Raise Spook Investors?

OpenAI’s pared-back funding round suggests AI jitters are spilling from public stocks into private markets. Some investors trimmed allocations to the roughly $20 billion raise, down from a $30 billion target.

However, the round still values OpenAI at $1.25 trillion, down from the $1.4 trillion first sought. Crossover funds, which hold both public and private companies, feel public-market swings directly, CNBC’s Kate Rooney said.

Are OpenAI’s Existing Backers Done Doubling Down?

Rooney said many private investors already hold OpenAI exposure. That makes doubling down during public-market swings harder, she added.

Some investors cut allocations before the Oct. 30 deadline. As a result, the first close will likely fall below $20 billion.

Earlier, OpenAI lowered its valuation target around Oct. 22, before cutting the round size.

In March, OpenAI raised $122 billion at an $852 billion valuation. That is about six times the current target.

A UAE consortium including MGX, a state-backed technology fund, is expected to be the round’s largest participant. OpenAI would also gain an option to lease computing capacity in the region, Reuters reported.

Does Weaker Private Demand Push AI Labs Toward Public Markets?

Weaker private demand puts more pressure on AI companies to tap public markets, Rooney said. In contrast, private markets used to move apart from public ones, she noted.

OpenAI confidentially filed for an initial public offering (IPO) in June. Its finance chief told staff in August the company will be public in 2027, CNBC reported.

Meanwhile, Anthropic filed publicly for a Nasdaq listing on Oct. 26. Some investors reportedly want to see Anthropic’s IPO price first.

The Nasdaq Composite fell 2.86% on Oct. 30, ending its worst month in over a year, CNN reported. The S&P 500 lost 1.82% that day. Investors are demanding evidence that data-center spending at Alphabet, Microsoft, Meta and Amazon will translate into profit.

If private rounds keep shrinking, AI labs may face public-market scrutiny sooner. In turn, Anthropic’s IPO price may test whether public investors still back trillion-dollar AI valuations. Reports put its target between $1.5 trillion and $2 trillion.