SoftBank Group Corp. plans to invest $500 million in OpenAI as part of a forthcoming funding round, The Information reported today.

A source told the publication that the cash infusion will give the ChatGPT developer a pre-money valuation of $150 million. That’s up from the $86 billion OpenAI was reportedly worth following a tender offer earlier this year.

Rumors that the artificial intelligence provider is raising new capital have been swirling for months. The round, which is expected to be worth up to $6.5 billion, will reportedly close within a week. It’s believed that OpenAI will receive the capital in the form of convertible notes, a type of debt that lenders can turn into shares down the road.

A SoftBank investment could potentially create an opportunity for the companies to collaborate on product development initiatives.

SoftBank is the majority stakeholder in Arm Holdings plc and recently acquired chip startup Graphcore Ltd. According to the Financial Times, the company hopes to use its semiconductor assets to enter the AI processor market. OpenAI, meanwhile, is reportedly seeking to collaborate with a chipmaker on designing a custom AI accelerator for its machine learning clusters. 

Besides SoftBank, the ChatGPT developer’s new funding round is also expected to include the participation of Microsoft Corp. The tech giant previously provided OpenAI with about $13 billion worth of capital and cloud infrastructure. Microsoft is expected to up its OpenAI stake by another $1 billion. 

Recent reports suggest that the other participants in the round will include Tiger Global, Coatue and Thrive Capital. Thrive is reportedly poised to become the lead investor with a contribution exceeding $1 billion. Moreover, it will receive an option to invest another $1 billion next year at the same valuation.

Nvidia Corp. may reportedly participate as well and, until a few days ago, it was believed that Apple Inc. could also become an OpenAI investor. Last Friday, the Wall Street Journal reported that the iPhone maker has decided against joining the round. It earlier gave up an observer seat on OpenAI’s board.

The report didn’t specify why Apple exited the funding round. It’s unclear whether the move will affect the iPhone maker’s product partnership with OpenAI, which focuses on a suite of upcoming iOS features called Apple Intelligence. One of the upcoming capabilities will allow Siri to have ChatGPT answer some user questions.

Last week, Reuters reported that OpenAI’s funding round will only close at a $150 billion pre-money valuation if the AI developer changes its organizational structure. Currently, OpenAI operates as a nonprofit. Its AI development efforts are led by a for-profit arm that launched in 2019.

The ChatGPT developer reportedly plans to restructure its for-profit arm as a benefit corporation. Additionally, OpenAI intends to remove caps that limit the maximum return its investors can realize on their stakes.

OpenAI’s fundraising push comes amid surging demand for its AI models. The company expects to end the year with $3.7 billion in revenue. According to the New York Times, OpenAI sees that number growing to $11.6 billion next year and $100 billion by 2029.

Photo: SoftBank