OpenAI Courts $500bn Valuation

OpenAI is in talks to sell employee shares in a transaction that could value the ChatGPT maker at $500bn. If successful, the deal would make it the most valuable private technology company in the world, overtaking Elon Musk’s SpaceX and placing it alongside the largest listed firms by market capitalisation.

The proposed secondary share sale would allow current and former employees to cash out part of their equity holdings. While the final valuation has yet to be confirmed, people close to the process say the deal is likely to be significantly larger than the $1.5bn stock sale completed by OpenAI late last year.

This time, the target price is far higher. The company was valued at $300bn earlier this year following a $40bn fundraising led by SoftBank. That round, which closed only months ago, was one of the biggest ever completed by a private firm. The latest discussions suggest investors believe OpenAI’s trajectory has steepened even further since then.

According to people briefed on the talks, OpenAI is working with Thrive Capital and other investors to structure the deal. The valuation would be applied solely to the secondary transaction and would not involve the company issuing new shares or raising additional capital.

Soaring revenue but rising costs

OpenAI has quickly become the market leader in generative artificial intelligence since launching ChatGPT in late 2022. Its suite of commercial tools has grown to include APIs, enterprise software, developer integrations, and premium subscriptions, transforming the company from a research lab into a significant commercial force.

The company’s annual recurring revenue has now reached $12bn, based on internal figures shared with prospective investors. That figure is expected to rise to more than $20bn by the end of next year, although OpenAI remains lossmaking. The costs of training and running its models, including infrastructure, staffing, and licensing, remain substantial.

Despite the losses, investors see a clear opportunity. Artificial intelligence is now viewed as a platform shift on the scale of the internet or mobile computing. Backers believe that early winners will capture a disproportionate share of future market value, even if they burn cash in the short term.

The intensity of interest reflects the broader financial environment. Venture capital has surged back into AI in recent months, while public markets have re-rated the sector. The largest US tech companies have added hundreds of billions in value as they ramp up AI spending. OpenAI, as a central partner to Microsoft and others, sits at the heart of this capital flow.

Pressure builds ahead of GPT-5

The share sale talks come just weeks before the expected launch of GPT-5, OpenAI’s next-generation model. The release is being closely watched by developers, researchers, and investors alike. GPT-4, which launched in March 2023, set a new standard for text generation and reasoning, but rivals have since made rapid progress.

Anthropic, one of OpenAI’s main competitors, recently updated its Claude model to improve coding performance. It has also quadrupled its own annual recurring revenue to $4bn and is in talks to raise a further $5bn at a valuation of $170bn. Both companies are trying to scale faster than the other in a race to dominate the emerging AI stack.

OpenAI has responded by releasing new tools for developers, including so-called open-weight models that can be freely customised. This strategy is intended to widen adoption among enterprise users while reducing reliance on proprietary distribution. At the same time, the company is deepening its cloud infrastructure partnerships with Microsoft and Oracle to support faster deployment and better performance.

The success of GPT-5 will play a critical role in determining whether OpenAI can maintain its lead. Analysts say the next frontier is not just linguistic fluency, but reliability, traceability, and integration into real-world tasks. If GPT-5 delivers on these fronts, it could become the backbone of a new generation of applications across industries.

Valuation debate grows louder

Despite the optimism, the proposed $500bn valuation is already drawing scrutiny. Some investors argue that the figure implies a revenue multiple well above even the most optimistic public market comparisons. For context, Meta and Google both trade on lower multiples, despite their vast cash flows and entrenched platforms.

OpenAI’s governance model also raises questions. The company operates a capped-profit subsidiary under the control of a non-profit board, a structure designed to align with its original mission. However, critics say this model introduces legal and financial uncertainty, particularly as larger sums of private capital become involved.

Those backing the share sale say the valuation reflects strategic positioning rather than current financial performance. OpenAI’s role in enabling Microsoft’s Copilot suite, powering hundreds of third-party applications, and pushing the technical frontier, makes it uniquely influential. Investors are paying for that potential, not present-day earnings.

Big Tech arms race accelerates

The context for OpenAI’s valuation push is a broader reconfiguration of the tech industry. Microsoft, Google, Amazon, Meta, and Apple are all committing massive resources to AI infrastructure and model development. The belief is that generative AI will underpin the next wave of software and services, from search and productivity to finance and health.

Microsoft has emerged as OpenAI’s closest partner, investing over $13bn and integrating GPT models across Azure and Microsoft 365. Google is developing its Gemini model family, Meta is investing in data-labelling giant Scale AI, and Apple is building its own on-device AI features. All are betting that proprietary control of the best models will confer lasting competitive advantages.

OpenAI’s decision to explore a $500bn valuation may be partly defensive. By setting a high benchmark, it asserts primacy in the face of growing competition and reinforces its position as the leading private AI developer. At the same time, the share sale allows it to reward employees and strengthen loyalty at a time when talent is in short supply.

A pivotal moment

For OpenAI, the proposed share sale is not just about liquidity. It is a signal of confidence in its future and a reflection of how quickly expectations have risen. Two years ago, it was a non-profit research group experimenting with new forms of human-machine interaction. Today, it is at the centre of a commercial and technological revolution.

Whether it can sustain that position will depend on execution. Scaling revenue without escalating losses, maintaining product leadership, managing regulatory risk, and defending its talent base will all be crucial. The release of GPT-5 and the performance of its enterprise tools will offer the clearest tests to date.

If the deal is completed, OpenAI will have redefined the ceiling for private valuations in technology. It would also mark the most significant moment yet in AI’s emergence as a foundational technology for the global economy.

For now, the company’s pitch is clear. It is not simply building a better chatbot. It is building the next great platform, one that investors believe could one day rival the scale and impact of Google, Microsoft, or Amazon.