OpenAI Raises Only $11 Billion, Fueling AI Bubble Concerns

AI pioneer OpenAI is facing headwinds, with slowing revenue growth, rising cash burn, and fundraising hurdles. These pressures emerge amid ongoing market concerns that the AI bubble may be about to burst.

OpenAI Raises Only $11 Billion at $1.25 Trillion Valuation

OpenAI's latest funding round fell short of its target, a sign that investors are questioning its valuation as evidence of slowing business mounts. The company raised $11.5 billion, lifting its valuation to $1.25 trillion, well below its $1.4 trillion goal. In comparison, Anthropic is eyeing a $2 trillion valuation in its IPO.

OpenAI's fundraising comes during a difficult period for the company. Its cash burn continues, with estimates suggesting it will burn through over $280 billion by 2030. Meanwhile, its annualized revenue is below $50 billion, missing the $70 billion analysts expected. Competition from Meta Platforms and open-weight models such as DeepSeek and Kimi is also intensifying.

OpenAI has also delayed its IPO from this year to 2027. While management cites AI safety concerns, the reality is the company worries about its fundamentals. It fears that, as things stand, going public would likely trigger a significant sell-off in its stock.

The fundraising also comes amid investor pushback on AI valuations. Australian company Firmus recently withdrew its IPO after investors disputed its valuation. Most AI companies, including hyperscalers like Alphabet, Meta Platforms, and Amazon, have fallen sharply over the past few weeks.

Meanwhile, prominent figures have warned about the AI bubble. These include Citadel's Ken Griffin and Bridgewater Associates' Ray Dalio.

ChatGPT Has Lost Market Share

The fundraising also comes as ChatGPT's market share has continued to decline this year. Its share fell below 50% for the first time. Since then, other companies have seen steady growth in both U.S. and international markets.

Anthropic's Claude has become one of the fastest-growing players in the industry. The company stated in its S-1 filing that its revenue surged to over $16.8 billion in the first half of this year, up from $1.6 billion in the same period last year. Moonshot's Kimi, Google's Gemini, and Meta's Muse have also all posted growth.

OpenAI is taking steps to boost its business ahead of the IPO. It has cut model prices, introduced advertising, and released more advanced models.