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OpenAI seeks $40 billion in funds amid DeepSeek-inflicted crisis

  • By Al Mayadeen English
  • Source: Agencies
  • 30 Jan 2025 23:58
4 Min Read

OpenAI, ChatGPT's parent company, is seeking $40 billion in funds amid rising competition, mainly from Chiense startup DeepSeek.

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  • Sam Altman, OpenAI CEO, speaks as President Donald Trump Masayoshi Son, and Larry Ellison listen, in the Roosevelt Room at the White House, Tuesday, Jan. 21, 2025, in Washington (AP)
    Sam Altman, OpenAI CEO, speaks as President Donald Trump Masayoshi Son, and Larry Ellison listen, in the Roosevelt Room at the White House, Tuesday, January 21, 2025, in Washington. (AP)

OpenAI, the creator of ChatGPT, is aiming to raise $40 billion in a new funding round that would boost its valuation to a remarkable $340 billion, according to a report from the Wall Street Journal.

Japan’s SoftBank is leading the investment, with discussions underway for a $15-25 billion stake, which would make it OpenAI’s largest financial backer. This comes amid rising competition, as Chinese startup DeepSeek introduced an advanced chatbot developed at a significantly lower cost than US competitors, unsettling markets.

SoftBank's involvement was first reported by the Financial Times. The funding round follows a previous round just three months ago, which valued OpenAI at $157 billion, signaling an unprecedented doubling of its valuation in a short period—an indicator of the massive investment required to build cutting-edge AI models and infrastructure.

OpenAI and SoftBank are part of the Stargate initiative, a $500 billion project led by US President Donald Trump aimed at advancing AI infrastructure. OpenAI plans to use part of the new funds to fulfill its $18 billion commitment to the Stargate project. SoftBank is also expected to contribute more than $15 billion to the initiative, with the total investment in the partnership possibly exceeding $40 billion.

SoftBank's stock rose 3% in Tokyo trading following the announcement. Despite early successes with investments in Yahoo! and Alibaba, SoftBank has faced challenges in other ventures. The company’s pivot into AI is bolstered by its stake in chip designer Arm.

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Elon Musk, a former investor in OpenAI and critic of its CEO Sam Altman, has dismissed the Stargate initiative, suggesting that its investors lack the financial resources they claim. Altman has refuted Musk's comments as "wrong."

DeepSeek disrupts global tech markets

Bloomberg on Monday reported that Chinese artificial intelligence startup DeepSeek has shaken global technology markets, raising concerns about the future of America's technological dominance. The company unveiled a revolutionary AI model that delivers powerful performance while operating on less-advanced chips, challenging the high-cost infrastructure central to US tech firms like Nvidia. This breakthrough has been widely regarded as a game-changer, showcasing that cutting-edge AI can be achieved without heavy reliance on top-tier hardware.

Shares of Nvidia Corp., which has been a leader in the AI boom, plunged by 10% in premarket trading, reflecting market anxiety over the potential disruption to its business model. Meanwhile, Nasdaq 100 futures dropped 3.4%, and S&P 500 futures declined 2%, signaling widespread market turbulence. Europe's tech sector also took a hit, with ASML Holding NV dropping 11%. The Stoxx 600 technology sub-index is braced for a combined loss of $1 trillion in market capitalization if the trends persist.

"DeepSeek shows that it is possible to develop powerful AI models that cost less," said Vey-Sern Ling, managing director at Union Bancaire Privee. "It can potentially derail the investment case for the entire AI supply chain, which is driven by high spending from a small handful of hyperscalers."

The release of DeepSeek's model had immediate global repercussions:

  • Nasdaq futures saw a massive uptick in trading, with over 200,000 contracts exchanged by 4:45 a.m. in New York—four times the average volume for that time.
  • Chinese stocks tied to AI, such as Merit Interactive Co., surged to their daily limits, while the Hang Seng Tech Index climbed 2%.
  • In contrast, European and US AI-related companies faced sharp declines. Siemens Energy AG, one of Europe's AI-linked firms, dropped 20%.

These developments have cast doubts on the high capital expenditures driving the US AI boom. Nirgunan Tiruchelvam, head of consumer and internet research at Aletheia Capital, noted, that the DeepSeek product "is deeply problematic for the thesis that the significant capital expenditure and operating expenses that Silicon Valley has incurred is the most appropriate way to approach the AI trend. It calls into question the massive resources that have been dedicated to AI."

  • DeepSeek
  • openAI
  • ChatGPT
  • United States
  • Donald Trump
  • China

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