OpenAI’s ambitious $40 billion private funding round faces a potential reduction of $10 billion if the company fails to restructure into a for-profit entity by December 31. The funding round, which was initially expected to bring OpenAI’s valuation to $300 billion, could shrink to $30 billion, according to a source familiar with the deal.
SoftBank, which had committed $30 billion, would see its investment drop to $20 billion, while the remaining $10 billion—largely coming from investors including Microsoft—would remain unchanged.
The Wall Street Journal first reported on the funding provision, which places increased pressure on OpenAI to finalize its transition into a for-profit entity. This move would require approval from both Microsoft and the California Attorney General, but it also faces legal challenges from Elon Musk. Musk, who co-founded OpenAI in 2015 when it was a nonprofit research lab, has been highly critical of its shift towards commercialization and has filed a lawsuit against the company over its direction.
This funding round comes in the wake of the DeepSeek frenzy, which sent ripples across the U.S. AI landscape. DeepSeek, a Chinese AI model, gained widespread attention for its cost-effectiveness, with claims that it could deliver performance comparable to top-tier American AI models at a fraction of the computational expense. The emergence of DeepSeek sparked speculation that companies like OpenAI, Google DeepMind, and Anthropic might be forced to cut operating costs or rethink their pricing strategies.
However, OpenAI’s latest funding round suggests that the DeepSeek buzz has not significantly impacted the financial trajectory of the U.S. AI industry. Despite concerns that cost-efficient alternatives could shake up the dominance of American AI firms, OpenAI is still commanding massive capital investments, reinforcing the belief that the AI race remains firmly centered in the U.S. as a multi-billion-dollar industry.
Investors participating in the funding round will receive convertible notes that will later be exchanged for equity once OpenAI finalizes its restructuring. A portion of the capital is expected to support OpenAI’s commitment to Stargate, a $500 million joint venture with SoftBank and Oracle that was announced by President Donald Trump in January. Stargate is a major AI infrastructure initiative aimed at accelerating OpenAI’s development of advanced artificial intelligence models and computing power.
The pressure to secure additional funding comes as OpenAI undergoes major internal changes. Last week, the company announced a leadership shake-up, with CEO Sam Altman stepping back from daily operations to focus on AI research and product innovation. Brad Lightcap, OpenAI’s Chief Operating Officer, will now oversee the company’s business operations and daily management.
Despite the challenges surrounding its restructuring, OpenAI remains on a strong financial trajectory. The company expects its revenue to nearly triple to $12.7 billion in 2025, driven by surging demand for its AI models and services. The ability to secure billions in fresh capital further solidifies OpenAI’s dominant position in the industry, even as it faces competition from emerging cost-effective AI models like DeepSeek.
While the DeepSeek frenzy briefly raised questions about AI cost structures, OpenAI’s continued ability to raise tens of billions suggests that the U.S. AI industry remains on an aggressive growth path, undeterred by the emergence of lower-cost competitors.
