OpenAI scales back fundraising target as AI-spending doubts rattle Wall Street

OpenAI has cut the size of the funding round it is racing to close before a planned public listing, now seeking as much as $20 billion rather than the roughly $30 billion it was pursuing just weeks ago, according to people familiar with the deal cited by CNBC. The company is still pushing to lock in commitments at a valuation of $1.25 trillion, a figure that itself was lowered from an earlier $1.4 trillion target after some prospective backers balked at the price.

The retreat lands days after a bruising week for the stocks most exposed to artificial-intelligence spending. On October 30, the Nasdaq 100 posted its worst session since mid-June, falling 3.4% in afternoon trading and briefly nearing correction territory, while the Philadelphia Semiconductor Index sank 7.2% and the S&P 500's technology sector dropped more than 4%, according to NBC News. More than $1 trillion in market value was erased from Nasdaq 100 companies that day, on top of a roughly $500 billion plunge in Alphabet's valuation the previous session — the Google parent's worst day on record.

A lower number, a stubborn valuation

The OpenAI round, which has not closed, is being led by investors from the United Arab Emirates alongside the hedge fund Coatue, with Morgan Stanley running the fundraising process. OpenAI had set a deadline late last week for investors to commit, and some reduced the size of their allocations rather than drop out entirely, a sign of what the Financial Times described as "investment fatigue" among backers who had already poured money into the company's earlier rounds. The company is reportedly weighing a retail-style offering aimed at family offices and wealthy individuals to help fill any shortfall, at the same $1.25 trillion valuation.

The target valuation itself had already been marked down once, from an initial $1.4 trillion pitch to the current $1.25 trillion figure, as Bloomberg reported in late October. That price tag is still a large step up from where OpenAI stood seven months ago. The company closed a $122 billion round on March 31 at an $852 billion post-money valuation — then the largest private financing in Silicon Valley history — after starting the process in February with a target of $110 billion at a $730 billion valuation. Backers in that round included SoftBank and Nvidia, which each committed roughly $30 billion, and Amazon, which pledged $50 billion contingent on OpenAI eventually going public or reaching a technical threshold for artificial general intelligence. More than $3 billion came from individual investors funneled through bank brokerage channels, OpenAI's first opening of a round to retail money.

The new money is intended partly as a bridge to that listing. OpenAI filed confidentially for an initial public offering with the Securities and Exchange Commission earlier this year, and chief financial officer Sarah Friar told staff in August that the company "will be a public company in 2027." Chief executive Sam Altman struck a more cautious note in September about moving too quickly toward a listing, citing concerns about the pace of the company's safety work. OpenAI did not respond to requests for comment on the revised fundraising target, CNBC reported.

Big Tech's spending under scrutiny

The timing is not coincidental. The selloff that preceded OpenAI's retreat was driven largely by investors reassessing whether the hundreds of billions of dollars that Alphabet, Amazon and Microsoft are plowing into data centers and chips will pay off quickly enough to justify the spending. All three companies reported quarterly results in the same week.

Alphabet's report, filed October 28, showed revenue of $127.6 billion for the third quarter, up 25% from a year earlier but shy of the roughly $128.2 billion analysts expected, with Search and other advertising revenue growing 12% to $63.35 billion — a slowdown from the 17% to 19% growth rates posted earlier in the year, according to the company's own earnings release filed with the SEC. An $8.7 billion loss on equity investments helped pull diluted earnings per share down to $2.12, well below the roughly $3.01 consensus estimate, and the stock's subsequent plunge wiped out about half a trillion dollars in market capitalization. Capital spending on property and equipment came to $51.4 billion for the quarter alone.

Amazon, reporting the next day, posted stronger headline numbers — net sales of $201.9 billion, up 12%, with Amazon Web Services revenue climbing 39% to $46 billion — but its earnings release reaffirmed guidance for roughly $220 billion in capital expenditures for 2026, up from the approximately $200 billion the company had guided to earlier in the year. Shares fell as much as 10% in after-hours trading before paring the loss to close down 1.4% on Friday. Microsoft, which reported October 28, posted revenue of $92.3 billion, up 19%, and GAAP diluted earnings per share of $4.92, with Azure cloud revenue up 48% to $33.2 billion, according to its own quarterly earnings statement. Even with those stronger results, Microsoft's spending on property and equipment more than doubled year over year, to $39.4 billion for the quarter, underscoring how quickly capital outlays are accelerating across the industry.

Chipmakers and cloud startups take the hit

The sharpest declines Friday fell on companies that supply the hardware behind that buildout. Memory-chip maker SanDisk fell 13%; Advanced Micro Devices, Arm Holdings, Qualcomm and Marvell Technology each dropped roughly 10%; and so-called "neocloud" firms Nebius and CoreWeave, which rent out AI computing capacity, each lost more than a tenth of their value, per NBC News's tally of the session. The moves reflected a broader unease that the advertising, retail and consumer businesses generating the cash to fund an estimated $750 billion in combined AI spending by America's largest technology companies this year are themselves showing signs of slowing — the same dynamic visible in Alphabet's decelerating search growth.

For OpenAI, the market's mood matters directly because its own spending commitments dwarf even those of the public cloud giants. The company told investors in February that it is targeting roughly $600 billion in total computing expenditures through 2030, and it is separately negotiating for additional data-center capacity in the United Arab Emirates, on top of the Stargate UAE project announced in 2025 with the Emirati AI firm G42. A smaller fundraising round, even at a steady valuation, leaves less cash in hand to meet those commitments without turning to debt or revenue.

"Right now would be an ill-advised moment to go public," Sam Altman told reporters in September, citing concerns about the pace of AI safety work.

A competitive clock

OpenAI's urgency is also shaped by its chief rival. Anthropic is expected to make its own stock-market debut in mid-November, seeking a valuation reportedly between $1.5 trillion and $2 trillion — after raising $65 billion in May at a $965 billion valuation. According to Reuters' sourcing reported by TheNextWeb, some investors view committing to OpenAI's round now as a way to lock in exposure to the sector before money instead flows to Anthropic's listing. That rivalry gives OpenAI a reason to accept a smaller, faster round rather than hold out for its original $30 billion target.

What happens next depends on investor appetite over the coming weeks. The round remains open, and its final size, investor roster and structure could still change, OpenAI has told reporters through unnamed representatives cited by multiple outlets. A confidential S-1 sits with the SEC without a disclosed timetable, and executives have offered conflicting signals — Friar's 2027 public-listing pledge against Altman's caution about moving too fast. Markets, meanwhile, head into the back half of the fourth quarter watching whether Alphabet, Amazon and Microsoft's next round of spending commentary brings more of the same scrutiny that hit their shares last week.