OpenAI cuts funding target to $20 billion as AI spending doubts spread

OpenAI is now seeking up to $20 billion in its latest funding round, down from an earlier target of as much as $30 billion, CNBC confirmed on Saturday. The cut lands at the end of a week in which investors openly questioned whether the tech industry's massive spending on AI infrastructure will ever pay off.

The round has not closed, and the figures could still move. A person directly familiar with the deal told CNBC the terms remain subject to change, speaking on condition of anonymity because they were not authorized to discuss the details. OpenAI did not immediately respond to a request for comment.

The reduction matters far beyond one company's bank balance. OpenAI is the most heavily funded private company in the AI boom, and its ability to raise money on demand has been treated as a proxy for investor confidence in the entire sector. A $10 billion haircut to its target is the clearest signal yet that the mood has shifted.

What do we know about the reduced round?

The Financial Times first reported the trimmed target, saying OpenAI cut its goal by $10 billion. According to the FT, the company will pursue a post-money valuation of $1.25 trillion — a figure that would still rank among the highest ever attached to a private firm.

The FT also reported that OpenAI set a Friday deadline for investors to commit to the round. Some investors chose to reduce their allocations rather than walk away entirely, which suggests hesitation at the margins rather than a wholesale retreat.

Investors from the United Arab Emirates are leading the round alongside Coatue, the US investment firm, as CNBC previously reported. The simple takeaway: OpenAI still wants a lot of money, but it will settle for a third less than it originally asked for.

Why did this happen during a brutal week for AI stocks?

The timing is not a coincidence. News of the smaller round follows a week in which investors asked pointed questions about whether big tech firms' spending on AI — especially to build out data centers and snap up GPUs — will deliver adequate returns.

That doubt showed up directly in share prices on Friday:

• Intel, the chip maker, fell 25% after issuing lackluster revenue guidance.
• Micron dropped 5.5%.
• Nvidia, the dominant supplier of AI chips, fell 4%.

When the companies that make the physical building blocks of AI lose that much value in a single session, funders of private AI companies start doing their own arithmetic. One rough week doesn't kill a funding round, but it clearly makes investors less eager to write the largest checks.

What did Microsoft, Google and Amazon signal about spending?

The public market jitters had their own fuel. Microsoft, Alphabet's Google and Amazon have been on a spending blitz in recent years to meet surging demand for AI infrastructure. But all three issued capital expenditure figures or forecasts last week that came in below analysts' estimates, according to CNBC.

That pattern matters because these three companies are effectively the AI economy's biggest customers. Their data center budgets flow to chipmakers, server builders and, indirectly, to model developers like OpenAI. When their capex comes in lighter than expected, the entire supply chain reads it as a demand signal — and prices it accordingly.

In short, the same week the biggest buyers slowed down, OpenAI found it could raise $20 billion more easily than $30 billion.

How bad was Alphabet's week?

Alphabet suffered the sharpest single blow. The company saw its worst trading day ever on Thursday after its search revenue fell short of expectations, CNBC reported.

The shortfall had an AI-specific wrinkle. Philipp Schindler, Alphabet's chief business officer, said the impact on search was partly due to lower monetization within the company's AI Mode — the product that lets users interact with search through conversational AI instead of the traditional list of sponsored links.

That admission cuts to the heart of the industry's current anxiety. If AI features monetize worse than the products they replace, then every dollar spent building them stretches the payback period further out. The takeaway: even the world's dominant search company is struggling to make its AI products as profitable as the old ones.

What does a $1.25 trillion valuation still say about confidence?

Even the reduced round tells a story of extraordinary confidence. OpenAI is reportedly pursuing a post-money valuation of $1.25 trillion while trimming the amount of cash it asks for — meaning investors may believe the company is worth more while committing less new money at the margin.

That combination, a slightly smaller round at a still-enormous valuation, is consistent with what the FT described: investors reducing allocations rather than refusing to participate. Backers from the United Arab Emirates and Coatue remain in the lead, and the round continues.

The mechanics are worth spelling out. A funding round of this size requires enormous checks from a small number of institutions. When even a few of those institutions get nervous — because chips are selling off, capex forecasts missed, or AI products are monetizing poorly — the round shrinks. OpenAI didn't lower its valuation ambition; it lowered the ask.

What happens next?

The round is still open, and the person familiar with the deal cautioned that the numbers could change before it closes. OpenAI has not commented publicly, and the Friday commitment deadline reported by the FT suggests the final shape of the round should become clear soon.

The bigger question is whether this week marks a temporary wobble or a durable repricing of AI risk. With Microsoft, Google and Amazon all guiding below capex expectations, chip stocks sliding, and now OpenAI trimming its raise by a third, the pressure is on the industry to show that AI products can earn back the hundreds of billions being spent on them. The next round of earnings — and the final tally of OpenAI's raise — will tell us which way the money is leaning.