Artificial intelligence pioneer OpenAI laid out more details of its plans to adopt a for-profit business structure in 2025, amid negotiations with investor Microsoft (MSFT) and a feud with Tesla (TSLA) founder Elon Musk. Microsoft stock fell Friday.
In a blog post, OpenAI said it plans to create a Delaware public benefit corporation to oversee commercial operations.
“We once again need to raise more capital than we’d imagined. Investors want to back us but, at this scale of capital, (we) need conventional equity and less structural bespokeness,” the OpenAI board said.
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OpenAI, Microsoft Talks At Impasse?
OpenAI is negotiating with Microsoft, which has invested some $14 billion into the startup, over what equity stake it would get in the restructured company, the Information recently reported. Also, OpenAI uses Microsoft’s cloud computing infrastructure. Plus, it shares revenue with the software giant.
Meanwhile, tech maverick Musk has filed a federal lawsuit aiming to block OpenAI’s conversion to a for-profit company. Musk left the OpenAI board in 2018.
OpenAI recently raised $6.6 billion in new funding, valuing the startup at $157 billion, up from $86 billion early this year. The new round was led by venture capital firm Thrive Capital. New investors included SoftBank and Nvidia (NVDA).
OpenAI is expected to lose around $5 billion this year on revenue of $3.7 billion. Also, OpenAI is expected to burn $14 billion in cash in 2026. At the earliest, it might break even by 2029, according to various reports.
“The nonprofit’s significant interest in the existing for-profit operation would take the form of shares in (OpenAI’s business) at a fair valuation determined by independent financial advisors,” OpenAI said in Thursday’s blog post. “This will multiply the resources that our donors gave many fold.”
Microsoft Stock Among AI Plays
OpenAI, Anthropic and other startups are scrambling for cash infusions from well-capitalized tech industry giants in order to continue operating.
Amazon.com (AMZN) in November put $4 billion more in Anthropic, bringing its investment to $8 billion.
The AI trend has relied mainly on large language models, or LLMs, which require massive amounts of data and computing power to be trained. Large language models allow users to interact with AI systems without the need to write algorithms.
OpenAI released generative AI-based ChatGPT in late 2022 and has been adding new LLMs to its family.
Further, Microsoft and chipmaker Nvidia are among AI stocks to watch.
On the stock market today, Microsoft stock dropped 1.9% to 429.68. Microsoft stock has climbed 16% in 2024.
Meanwhile, Nvidia stock has gained 182% in 2024. Amazon stock has advanced 49%. Tesla stock is up 82%.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
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