OpenAI is in talks to hold a secondary sale that could boost its valuation to $500 billion, multiple publications reported today.

A secondary sale is a transaction in which a company’s existing shareholders sell equity. The company itself doesn’t receive any of the proceeds. According to CNBC, OpenAI’s secondary sale will be open to current and former employees.

It’s believed that Thrive Capital could lead the investment. The venture capital firm led a $6.6 billion funding round for OpenAI last year at a $157 billion valuation. It’s unclear whether any other investors will participate or how many shares will be sold.

OpenAI has held multiple secondary sales over the past few years. According to Reuters, one of the first such deals closed around the same time ChatGPT first became available to the public in November 2022. The transaction valued OpenAI at $20 billion, or less than one tenth the $300 billion that it’s currently with. 

That the ChatGPT developer’s next secondary sale could reportedly add $200 billion to its valuation may reflect investor optimism about GPT-5. In a post on X today, OpenAI hinted that the long-anticipated large language model will be announced tomorrow.

Two early GPT-5 testers told Reuters today that they are “impressed” with the model’s science, coding and math capabilities. However, they noted that it won’t bring as big of an improvement in output quality as the leap from GPT-3 to GPT-4.

OpenAI reportedly encountered several challenges while developing GPT-5. Reuters’ sources said that the company ran into a “data wall,” which likely means it struggled to obtain enough high-quality training data. Additionally, it’s believed that the project was complicated by hardware malfunctions during training runs.

Chief Executive Officer Sam Altman previewed GPT-5 in February. At the time, he suggested that the model could offer a simpler user experience than the company’s current algorithms. He also revealed that GPT-5 will be capable of determining whether it should “think for a long time or not” based on the task that it’s given.

OpenAI plans to integrate the LLM into both the free and paid versions of ChatGPT. Users with paid accounts will have access to a more capable edition of the model.

According to CNBC, its annualized revenue jumped from $10 billion in June to $13 billion last week. The ChatGPT developer expects to reach the $20 billion mark by year’s end. That rapid growth likely factored into the $500 billion valuation OpenAI is reportedly targeting with its secondary sale.

At least three other LLM developers are reportedly negotiating fresh investments of their own. Anthropic PBC is said to be seeking a multibillion-dollar funding round that could value it at $170 billion, while Mistral AI SAS is hoping to raise $1 billion. It’s also believed that Cohere Inc. could raise $500 billion at a valuation of up to $6.5 billion. 

Image: Unsplash