OpenAI, the artificial intelligence company behind the popular generative chatbot ChatGPT, has completed a deal valued at $80 billion or more. The value jump makes it one of the world’s most valuable closely held technology companies, above Stripe and Chinese online retailer Shein. The move also vaults it ahead of Elon Musk’s SpaceX and TikTok parent ByteDance.
The new valuation comes more than a year after the company dazzled audiences with its debut of a generative AI technology that could generate cinematic video clips based on text prompts. That launched a frenzy among tech giants, investors, and startups to advance the burgeoning field of AI. Microsoft Corp (MSFT.O) has invested $13 billion in OpenAI to date and is a crucial backer of its latest generation of AI software known as GPT-4, which can be less error-prone than previous models.
But the investment hasn’thas been smooth sailing. In late 2022, CEO Sam Altman was fired, then quickly rehired after employees demanded action from the board, according to people familiar with the matter. Altman’s reputation as a savvy corporate infighter—a trait that served him well as he fought off impulsive bids by early board members like Elon Musk to take over the company—irked some of his peers on the six-person board. Those people said they found his tactics manipulative and conniving, a style that rankled with others on the board who lacked backgrounds in technology or corporate governance.
Altman and the board also struggled and needed help to agree on a vision for the company’s future. They argued about whether the company should acquire a chipmaker, for example, to increase its access to the expensive artificial intelligence chips that power the software. Those people also debated whether to expand the company by buying a rival or merging with another company. But they struggled to hammer out a consensus as they grappled with a tumultuous period for the startup.
The sources said the board’s unease over Altman’s machinations made it hard for them to work together effectively. At the same time, they saw how the new generative AI technologies could be used in businesses and consumers, including for e-commerce and banking. “If they can get the company up and running as a profitable business, there’s a huge opportunity for them,” one of those sources said.
Despite the leadership tumult and board shuffle, the share sale is proceeding as planned. Under the new deal, the company will sell existing shares in a so-called tender offer led by venture firm Thrive Capital. The move allows employees to cash out their company shares rather than raise money through a traditional funding round, which would lower the firm’s value.