OpenAI’s $500 Billion Valuation Faces Huge Cut

By Douglas A. McIntyre Published Dec 2, 9:15AM EST

24/7 Wall St. Key Points

Challenges to OpenAI’s $500 billion valuation are starting to pile up.
New investors may be cutting that valuation before they invest, affecting what OpenAI ultimately is worth.

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OpenAI’s $500 Billion Valuation Faces Huge Cut — © Vladimir Razguliaev / iStock via Getty Images

It has been all good news for OpenAI this year. It reached a valuation of $500 billion. Its CEO, Sam Altman, stood next to President Trump in the White House early this year during the announcement of a new $500 billion Stargate AI infrastructure program. It settled a fight with Microsoft (its largest shareholder, with a 24% stake) over becoming a for-profit company. And it created financial partnerships with Oracle, Nvidia, Softbank, and AMD.

Some outsiders worry about this high valuation, in part because OpenAI says it will not make money until 2030 and may have to raise hundreds of billions of dollars to cover losses and investments in AI data centers.

OpenAI has held the lead in the artificial intelligence (AI) chatbot sector, a lead of as high as 80%. Moreover, it has led AI market share in the Apple App Store downloads.

OpenAI’s GPT-5 received tepid reviews after its recent release. Also recently, Alphabet released its new Gemini 3. There is already anxiety at OpenAI about the quality of its latest product. According to The Information, Altman said OpenAI employees “need to stay focused through short-term competitive pressure . . . expect the vibes out there to be rough for a bit.” Data shows the Gemini downloads have started to catch up to ChatGPT.

When private company valuations drop, investors sometimes face a “down round.” This happens when new investors cut the valuation of a company before they invest. This is often considered the primary yardstick for what a private company is worth.

The challenges to OpenAI’s valuation are starting to pile up. Its value is almost as high as Oracle Corp’s (NYSE: ORCL | ORCL Price Prediction) $572 billion. Oracle’s revenue in the most recent quarter was $14.9 billion. Net income was $2.9 billion. It has almost $11 billion on its balance sheet. Oracle is considered one of the leaders in the AI revolution.

OpenAI’s future prospects are under siege, and with that, so is its $500 billion valuation.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.