OpenAI Lowers Funding Target to $1.25T Amid AI Market Sell-Off

Key points

• OpenAI is raising $30 billion at a $1.25 trillion valuation, a 50% jump from its March valuation of $852 billion.
• The company reduced its target from $1.4 trillion after facing weak demand from Morgan Stanley and Dragoneer clients.
• Investors are hesitant due to AI stock declines, debt concerns in data centers, and fatigue from previous large rounds.
• Coatue and UAE funds are in talks to lead the round, which includes a right of first refusal on new UAE computing power.
• OpenAI is using this round as a bridge to an IPO expected in the first half of 2027, while rival Anthropic prepares for an IPO before Thanksgiving.

Background

OpenAI previously raised $122 billion in March 2026 at an $852 billion valuation. In September 2026, investors proposed a $1.2 trillion round, but OpenAI was not actively engaging in talks at that time. CEO Sam Altman had indicated the IPO would likely not happen until 2027 due to safety concerns. This current round follows those earlier discussions and reflects a shift in market conditions.

How outlets are covering it

Yahoo Finance reports that OpenAI is aiming for a $1.25 trillion valuation, noting that the company was previously looking to raise capital at a $1.5 trillion valuation, though it cites Bloomberg for that figure. The Financial Times provides more detail, stating that OpenAI pitched a $1.4 trillion pre-money valuation to Morgan Stanley and Dragoneer clients but faced weak demand, leading to the reduction to $1.25 trillion. The FT also highlights investor fatigue and the desire to wait for Anthropic’s IPO pricing before committing. Yahoo Finance emphasizes the broader AI stock sell-off and concerns about data center debt, while the FT focuses on the specific investor reactions and the deal structure, including the UAE computing power rights.

Why it matters

The reduced valuation signals a cooling in the AI investment market, as investors become more cautious about the sustainability of AI infrastructure spending. The timing of OpenAI’s round, ahead of Anthropic’s IPO, could influence how the market prices AI companies. A successful $30 billion raise would provide OpenAI with capital to continue operations and development until its 2027 IPO, while a smaller raise could indicate deeper market concerns.

What to watch

OpenAI has given investors until October 30 to commit to the deal. The company may raise less than $30 billion depending on final interest. Anthropic is expected to file its S-1 in the coming days, ahead of the Thanksgiving holiday, with a potential valuation of $2 trillion. OpenAI’s IPO is still targeted for the first half of 2027, but no exact date has been set.