OpenAI Aims for a $150 Billion Valuation

Is the sky the limit for OpenAI investors?

What a difference a few days make. OpenAI is now in talks to raise about $6.5 billion at a valuation of around $150 billion, The Times reports. Those numbers vastly exceed what ChatGPT’s parent company had been seeking not too long ago.

If the round comes together — talks remain fluid, and there’s no guarantee they will lead to a deal at those terms — it would underscore investors’ continued enthusiasm for artificial intelligence, even as questions about the future of the sector are piling up.

Only last week, OpenAI was seeking about $1 billion at a $100 billion valuation. But belief that the company will continue to lead the A.I. race appears to be driving current and prospective investors — potential participants in the round include Josh Kushner’s Thrive Capital, Microsoft, Apple and Nvidia — to open their wallets. (OpenAI is also in talks to secure a $5 billion revolving line of credit from banks, according to Bloomberg.)

To put the fund-raising effort in context:

• At $150 billion, the company would also be nearly twice as valuable as Intel.

• At $6.5 billion, the deal size would be tied for the fifth biggest venture funding round since 2006, according to PitchBook.

• A $150 billion valuation would be a huge win for Thrive, which led OpenAI’s last major fund-raising round at an $80 billion valuation.

• At that size, questions will grow about the company plans to go public via an initial public offering and add to pressure for it to restructure itself into an entirely for-profit enterprise.

OpenAI certainly needs the money. By some estimates, it’s burning through $7 billion a year to fund research and new A.I. services and hire more employees. It’s expected to introduce more products soon, including a tool that adopts a different reasoning approach than existing chatbots like ChatGPT.

And OpenAI is racing against other tech giants, including Microsoft (which has already invested $13 billion in the start-up) to innovate — and buy up expensive hardware to do it. (Jensen Huang, the C.E.O. of the chipmaker Nvidia, said on Wednesday that demand was so great for his company’s processors that relations with partners were getting tense.)

But the A.I. business is facing headwinds, raising concerns about overheated valuations. While indexes tracking the so-called Magnificent Seven leaders in A.I. are up sharply year-to-date, they’re down from their July highs amid investor worries about the cost of the arms race.

And regulators continue to ramp up their scrutiny of the industry. The latest instance: Ireland is examining whether Google’s use of personal user information in its A.I. model violated data-protection laws.

HERE’S WHAT’S HAPPENING

Norfolk Southern said it fired its C.E.O. for having an affair. Alan Shaw, the beleaguered rail company’s chief, was dismissed after an internal investigation found that he had a consensual relationship with the company’s chief legal officer, Nabanita Nag. (She was also fired.) His ouster ends a rocky tenure at the company, which is facing pressure from activist investors and lawsuits after a derailment in East Palestine, Ohio, last year.

The president of the Atlanta Fed is accused of violating securities trading rules. Raphael Bostic, who is a voting member on interest rate policy, “created an ‘appearance of acting on confidential’” internal information by making transactions during the Fed’s blackout periods, according to the central bank’s office of the inspector general. (He has said that he misinterpreted the rules.)

Top Wall Street banks plan to crack down on overworking new hires. JPMorgan Chase plans to cap junior bankers to no more than 80 work hours per week in most cases, and Bank of America will keep better track of young recruits’ time, The Wall Street Journal reports. The proposed changes come after longstanding criticism of the Wall Street culture of ultralong workweeks, which can sometimes top 100 hours.

The great market debate

One of the conundrums racking Wall Street seems largely settled: Wednesday’s slightly elevated inflation data has all but wiped out expectations that the Fed will make a jumbo half-percentage-point interest rate cut next week.

The S&P 500 rallied on Wednesday in a topsy-turvy day of trading, as inflation and recession fears continue to fade.

There were notable winners and losers coming off the presidential debate, too. The so-called Trump trade unraveled, while the “Harris trade” rebounded, a signal that investors saw a clear winner from Tuesday night’s showdown. (More on that below.)

The inflation picture is mixed. The headline Consumer Price Index rose 2.5 percent in August from a year earlier, the lowest level since February 2021. But core inflation, which strips out food and fuel, came in a bit hotter than economists expected.

A resurgence in shelter costs was the biggest culprit. The good news: Energy prices have fallen 10 percent year-on-year. “The Fed will see the C.P.I. report as another pebble on the scale for a quarter-percentage-point rate cut at next week’s decision,” Bill Adams, an economist at Comerica Bank, wrote in a research note on Wednesday.

The futures market on Thursday was pricing in a rate cut by 0.25 percentage points next week, and 1.5 percentage points worth of cuts in the following four Fed meetings. Market watchers see that pace as a sign that the economy is slowing, not heading into recession.

The markets are also focusing on politics. Investors on Wednesday sent shares in Trump Media & Technology Group — the former president’s social media company — tumbling by more than 10 percent, to its lowest level since the unprofitable enterprise went public in March.

Trump Media was one of the most discussed stocks on online investor forums on Wednesday, Ivan Cosovic, the managing director of Breakout Point, a market data company, told DealBook. “Retail investors’ sentiment is clearly bearish,” he said.

Short sellers are circling. This month, traders have netted about $35 million betting against Trump Media — a big turnaround from April — according to S3 Partners, a financial data company.

On the flip side, some stocks associated with Vice President Kamala Harris’s economic agenda soared. Two standouts: First Solar gained more than 15 percent, and SolarEdge Technologies was up 8.5 percent.

The Swift effect

Taylor Swift made her entrance into the 2024 election in style: Her endorsement of Vice President Kamala Harris has driven more than 337,000 visitors to Vote.gov through the link she included in her Instagram post, according to the General Services Administration.

But how much of an effect will the backing provide for both the presidential race and Swift’s billion-dollar business?

Harris’s campaign wasn’t ready for it, The Times reports, with the vice president learning about the endorsement in real time. But the campaign quickly capitalized on the news, rolling out so-called Harris-Walz-themed friendship bracelets, a nod to the singer’s Eras Tour, for $20 a piece. (The merchandise sold out by midday Wednesday.)

The Harris team also asked potential donors for $25 to “join Taylor Swift in supporting” the campaign.

Has everything changed for the race, or for Swift’s popularity? Donald Trump said that the endorsement would lead to bad blood with the public. “She’ll probably pay a price for it in the marketplace,” he told Fox News.

Some said that in today’s polarized political climate, artists benefited by not aiming for universal appeal. “I think it can actually be a disadvantage when artists don’t make their values known,” Tatiana Cirisano, a music industry analyst at MIDiA Research, told The Wall Street Journal.

One data point: Swift endorsed President Biden in 2020, and her Eras Tour, which began last year, is estimated to have raked in more than $1 billion.

Others noted that Swift didn’t make her endorsement overly political. The artist said that “fears” about artificial intelligence, after images appeared online that suggested she had backed Trump, was one reason she spoke out. “Given the ‘dangers of spreading misinformation,’ she’s not wading into politics for its own sake,” Lulu Cheng Meservey, a communications consultant, wrote on X.

To be sure, the race is far from over. The critic B.D. McClay noted in a Times guest essay this week that celebrity support didn’t win elections for John Kerry, who had the backing of Leonardo DiCaprio and Larry David in 2004, or Phil Bredesen, whom Swift endorsed for a Tennessee Senate seat in 2018.

But Democrats hope that the Swift endorsement is an extra dose of good karma, driving her huge, loyal and motivated fan base to campaign for Harris in a tight election.

“There’s a tendency to ‘go direct’ to your audience in tech these days, especially as press coverage has tended toward being more critical over the years.”

— Sheel Mohnot, a partner at the venture capital firm Better Tomorrow Ventures, after Meta’s C.E.O., Mark Zuckerberg, appeared on the “Acquired” podcast in front of more than 6,000 people at the Chase Center in San Francisco. The show has become a hit with business leaders looking for alternative platforms to traditional media.

Rethink Impact raises money for more impact

Rethink Impact, a venture capital firm focused on start-ups led by women, has closed a $250 million funding round, making it the biggest U.S. venture fund dedicated to investing in such companies, The Times’s Nell Gallogly writes for DealBook.

Rethink Impact now has more than $500 million in assets under management. The firm was founded in 2016 by Jenny Abramson and Heidi Patel and invests primarily in health, education, financial technology and climate companies.

Its successes include Spring Health, which provides mental health services. Rethink Impact led Spring Health’s $8 million seed round eight years ago, and the company is valued at $3.3 billion today.

Abramson hopes Rethink’s funding round will signal a rebound for venture capital deals for start-ups led by women. Venture investment in start-ups with at least one female founder dropped to $15.4 billion in the first half of 2024, its lowest amount raised in the first six months of a year since 2020, according to PitchBook data.

“There are real examples now that people can look at of tech companies led by women that have had just outstanding growth,” Abramson told DealBook.

Rethink Impact’s “raise really makes clear that investors are realizing that investing in women and impact is really good business,” she added.

Rethink Impact’s backers include more than 10 university endowments and organizations, including Melinda French Gates’s Pivotal Ventures.

“We’re proud to be an early and repeat investor in Rethink Impact to achieve our shared mission of putting more capital in the hands of women,” Erin Harkless Moore, managing director of investments at Pivotal Ventures, said in a statement.

THE SPEED READ

Deals

• BlackRock is working with Partners Group to let wealthy individuals gain access to private-market investments including leveraged buyouts and private credit. (WSJ)

• Flowcarbon, a climate company co-founded by Adam Neumann, is reportedly refunding investors after failing to bring its proposed crypto token to market. (Forbes)

Elections, politics and policy

• Speaker Mike Johnson canceled a vote on Wednesday on his initial plan to avert a government shutdown amid growing opposition by both parties. (NYT)

• Spain has urged the European Union to “reconsider” tariffs on Chinese-made electric vehicles, joining German opposition to the levies. (Bloomberg)

Best of the rest

• A group that includes civilians is conducting the first commercial spacewalk, from a SpaceX rocket. (NYT)

• Quinn Emanuel Urquhart & Sullivan, the law firm whose clients include Elon Musk, Alec Baldwin and major Wall Street banks, has again topped an annual ranking of most feared litigators. (BTI Consulting Group)

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