OpenAI Says It Now Needs ‘More Capital Than We’d Imagined’

OpenAI has announced plans to transition into a Public Benefit Corporation (PBC) by 2025, shifting away from its nonprofit roots to secure more substantial capital. The move aims to align with the increasing financial demands of artificial intelligence (AI) development and the competitive landscape, which includes tech giants like Microsoft, Google, Amazon, and challengers like Elon Musk’s xAI and Anthropic.

The company stated on Friday that creating a PBC structure will allow it to raise conventional equity, bypassing some nonprofit restrictions that have limited its ability to secure funding at scale. “We once again need to raise more capital than we’d imagined,” OpenAI’s board explained, citing the hundreds of billions being poured into AI by major companies.

Since the launch of ChatGPT, OpenAI has achieved a staggering $157 billion valuation, fueled by its advancements in generative AI. However, the cost of developing large language models remains steep. OpenAI expects $5 billion in losses on $3.7 billion in revenue this year, highlighting the gap between its aspirations and current financial capabilities. Much of its resources are directed toward acquiring high-powered processors, mainly from Nvidia, and cloud infrastructure backed by Microsoft.

The structural shift to a Delaware PBC “with ordinary shares of stock” will enable OpenAI to manage its commercial and nonprofit arms separately. While the nonprofit will focus on charitable activities in healthcare, education, and science, it will retain significant interest in the for-profit entity.

However, challenges loom. Elon Musk has filed legal actions to halt the for-profit transition, accusing OpenAI of betraying its original mission. Simultaneously, high-level departures have raised concerns about the company’s safety priorities. Former leaders like Jan Leike and Ilya Sutskever cited dissatisfaction with OpenAI’s focus on market-driven products.