OpenAI reportedly cuts fundraising and valuation targets amid AI jitters

OpenAI has trimmed its fundraising and valuation targets amid growing investor scepticism about the AI boom. The company, which had been courting investors at a $1.4 trillion valuation, lowered the figure to $1.25 trillion, according to the Financial Times. The adjustment was reported on 31 October 2026, as OpenAI seeks to raise about $30 billion before a planned stock‑market listing in 2027. The move comes alongside broader market anxiety sparked by a sharp sell‑off in tech stocks and comments from Nvidia’s chief executive about a “scarcity of capital” for AI rollout.

Background

The AI sector has been riding a wave of exuberant funding, but recent market signals suggest a cooling. Earlier in the week, more than $1 trillion was erased from U.S. tech equities after Meta disclosed a need for “hundreds of billions of dollars” to sustain its AI investments. Nvidia’s CEO Jensen Huang warned that limited capital was hampering AI deployment, adding to investor unease. Asian markets mirrored the sentiment, with Japan’s Nikkei 225 falling as much as 2.3 percent and ending the week down over 4 percent. Oil prices surged to a five‑month high, further pressuring risk‑on assets. Dan Ives of Yorkville Ives noted that a mix of macro‑economic factors – oil, bond yields, U.S. midterm elections, Federal Reserve policy, and geopolitical headlines – could trigger additional volatility, with AI names likely to be the first sold in any risk‑off move. OpenAI, which generates revenue from ChatGPT subscriptions and advertising, filed a confidential prospectus with U.S. regulators in June and has been in talks with investors, including Coatue and parties from the United Arab Emirates. Its main rival, Anthropic, is also preparing for an IPO, with valuation expectations slipping from $2 trillion to around $1.5 trillion.

What happened

The Financial Times reported that OpenAI reduced its valuation target from $1.4 trillion to $1.25 trillion after investor pushback, a $150 billion cut. The company is still aiming to raise $30 billion before a 2027 stock‑market listing, as CFO Sarah Friar told employees in August that the firm will go public the following year. The same source noted that a $1.25 trillion valuation would still represent a 47 percent increase from the $852 billion valuation recorded after a $122 billion funding round in March. TradingView’s coverage added that prediction‑market odds of OpenAI achieving a $1.25 trillion valuation by 31 December rose 20 percentage points to 85 percent after the fundraising report. The market‑watching platform said OpenAI is racing to lock in about $30 billion of new capital at an estimated $1.4 trillion valuation to pre‑empt Anthropic’s anticipated mid‑November IPO. Existing backers such as Abu Dhabi’s MGX and SoftBank Group are reported to be in talks to anchor the round. SoftBank’s credit default swaps reportedly jumped 12 basis points to 432, a four‑year high, reflecting concerns about its exposure to the financing. Zerohedge noted that five‑year default protection costs for Meta and Nvidia have crossed 100 basis points, while CDS spreads for Amazon, Alphabet and Microsoft have risen near or above investment‑grade benchmarks, underscoring broader skepticism about AI‑driven capex.

Market impact

The valuation cut shaved $150 billion off OpenAI’s target, moving it from $1.4 trillion to $1.25 trillion. OpenAI’s planned $30 billion raise still represents a sizable infusion of capital ahead of its 2027 listing. Prediction‑market odds for a $1.25 trillion valuation climbed to 85 percent after the report. SoftBank’s credit default swaps rose 12 basis points to 432, hitting a four‑year peak. Five‑year CDS spreads for Meta and Nvidia each surpassed 100 basis points, while spreads for Amazon, Alphabet and Microsoft approached or exceeded the North American investment‑grade benchmark. These moves illustrate heightened risk perception in the tech credit market as investors reassess the sustainability of AI spending.

Why it matters

The reduction in OpenAI’s valuation target signals that even the most prominent AI developers are feeling pressure from a tightening capital environment. A lower valuation may set a new benchmark for peer companies like Anthropic, whose own valuation expectations have already slipped from $2 trillion to about $1.5 trillion. The heightened credit spreads on major tech firms suggest that lenders are demanding higher compensation for perceived risk, which could raise financing costs for AI‑heavy businesses. If investors continue to demand lower valuations, the pace of AI‑related mergers, acquisitions and IPOs could decelerate, potentially slowing the broader diffusion of AI technologies across industries. Moreover, the market’s reaction underscores the interconnectedness of macro‑economic factors – oil prices, bond yields and geopolitical events – with sector‑specific sentiment, meaning that future AI funding rounds may be judged not just on technological promise but also on broader economic stability.