OpenAI has cut the target for its latest funding round by $10 billion, to about $20 billion, after investors balked at the price and a brutal week for AI stocks. The Financial Times reported the cut on Friday, October 30, citing people familiar with the matter, and Reuters carried the report the same day.

The OpenAI funding round cut also comes with a lower valuation: $1.25 trillion, down from the $1.4 trillion the company was pitching last month. Commitments were due Friday, but the first close is expected to land below $20 billion because some investors trimmed their allocations, the FT said.

That’s still an enormous raise. It’s just not the one OpenAI went out for.

A month ago, the ChatGPT maker was asking for $30 billion. Bloomberg reported on October 22 that the valuation under discussion had already slipped to $1.25 trillion, and the Wall Street Journal reported late October 30 that only about $11 billion had been committed so far — less than half the original ask, with more expected in the coming weeks. OpenAI hasn’t commented publicly on the round, and it did not immediately respond to Reuters’ request for comment.

Inside the OpenAI funding round cut

For most of October, the round looked like a formality. OpenAI had put a $1.4 trillion pre-money valuation in front of investors in early October, according to Bloomberg’s October 5 reporting, and by mid-October it was pitching the $30 billion raise to private wealth clients. Then the market turned.

Friday’s deadline landed on one of the worst days for tech stocks since June. The Nasdaq fell 2.9% on Friday and is down 7.8% from its record close on October 6, Reuters reported. S&P Global Ratings even took an early step toward a possible downgrade of Meta’s credit rating within two years, citing pressure from elevated AI spending, Bloomberg reported.

OpenAI isn’t starting over. It has lowered the target to roughly $20 billion and kept the $1.25 trillion valuation, and it expects additional commitments in the coming weeks. Wealthy individuals will also get a chance to invest later through a retail offering at the same $1.25 trillion valuation, the FT said.

Why investors pulled back

Timing did OpenAI no favors. Anthropic, its closest rival, is heading toward an imminent public listing, and Reuters reported that OpenAI was keen to close this round first partly because both companies are tapping a similar investor base. An investor weighing a private bet at $1.25 trillion doesn’t have to guess what the public market thinks for much longer — a listed Anthropic will tell them.

Money also got more expensive to justify. Bloomberg’s markets coverage noted that America’s tech giants are on track for a collective $750 billion in AI spending this year, and the core advertising, consumer and retail businesses funding that buildout are starting to show signs of slowing. When the Nasdaq drops nearly 3% in a day, a $30 billion private check at a record valuation is a harder sell than it was in September.

None of that means demand vanished. It means the price moved. A $150 billion valuation haircut in three weeks is the market repricing risk, not walking away — and $11 billion committed by the first deadline is still a very large number by any normal standard.

Who is still buying in

A consortium of investors from the United Arab Emirates, including state-backed technology fund MGX, is expected to be the largest participant in the round, the FT reported. As part of the deal, OpenAI would gain the option to lease newly developed computing capacity in the region, giving it a new source of compute alongside its US data center buildout.

Venture firms Founders Fund, Coatue, Sequoia Capital and Andreessen Horowitz are also expected to participate, according to the FT. SoftBank, which led earlier OpenAI rounds, has been in talks to join this one too, Reuters reported on October 19, though its participation hasn’t been confirmed.

That mix matters. MGX brings sovereign-scale capital and Gulf computing capacity. The venture firms bring the usual Silicon Valley stamp of approval. If the retail tranche lands as planned, it would also put OpenAI equity in front of wealthy individual investors at a price that, until recently, only institutions could touch.

What this means for OpenAI’s 2027 IPO plans

OpenAI is pursuing a public listing in 2027, Reuters reported, and this round was supposed to be the last big private step before it. A smaller raise doesn’t derail that plan, but it does change the math. Less private cash means less cushion between now and an IPO, and it means the public market debut will carry more weight as a funding event, not just a liquidity event.

There’s a second read on the cut, and it’s worth stating plainly: OpenAI may not need the full $30 billion right now. The FT has separately reported that the company’s annualized revenue run rate was close to $50 billion at the end of September. A company generating that kind of revenue can afford to take less dilution and come back for more later, on better terms, if the market recovers.

Either way, the $1.25 trillion mark is now the number to watch. If Anthropic’s listing prices anywhere near its own private marks, OpenAI’s valuation will look like a bargain or a stretch within weeks — and the investors who trimmed their allocations on October 30 will know quickly whether they were careful or just early.

Frequently asked questions

Why did OpenAI cut its funding round target?

OpenAI cut the target from $30 billion to about $20 billion after some investors reduced their allocations during a sharp selloff in AI stocks. The Financial Times reported the cut on October 30, and the Wall Street Journal reported about $11 billion had been committed by the deadline.

What is OpenAI’s valuation in the new funding round?

The round values OpenAI at $1.25 trillion, down from the $1.4 trillion valuation it pitched to investors last month. That is still the highest valuation ever sought by a private company.

Who is investing in OpenAI’s $20 billion funding round?

A consortium of United Arab Emirates investors including state-backed fund MGX is expected to be the largest participant. Founders Fund, Coatue, Sequoia Capital and Andreessen Horowitz are also expected to take part, and SoftBank has been in talks to join.

Will OpenAI still raise the full $20 billion?

Not necessarily at the first close, which is expected to come in below $20 billion. OpenAI expects to raise more in the coming weeks, and wealthy individuals will be offered a later retail tranche at the same $1.25 trillion valuation.

Sources: Financial Times, Reuters, The Wall Street Journal, Bloomberg.