Investors seeking to buy into OpenAI’s latest $6bn-plus funding round are making an unprecedented bet that the ChatGPT-maker will become the world’s dominant artificial intelligence company and be worth trillions of dollars.

The San Francisco-based start-up is finalising a new fundraising valuing the company at $150bn. Thrive Capital, Josh Kushner’s venture capital firm, has already provided at least $1bn to the company in recent weeks, according to people with knowledge of the deal.

OpenAI aims to raise an additional $5bn or more. Apple, Nvidia and Microsoft — the three most valuable technology companies in the world — are in talks to join the funding round. Others seeking to invest are New York-based Tiger Global and United Arab Emirates-backed fund MGX, according to multiple people with knowledge of the discussions. The deal is expected to close imminently.

However, other leading tech investors, including Andreessen Horowitz and Sequoia Capital — Silicon Valley’s top venture capitalists and existing OpenAI backers — are sitting out of the round, according to people with knowledge of the matter.

Investors in the deal said it was highly unusual in its scale and structure. Venture investors such as Thrive and Tiger typically write far smaller cheques for less established start-ups, hoping for 10 to 100 times their money back.

To achieve such a return with OpenAI, the company would need to grow in the coming years to become worth at least $1.5tn; larger than Facebook parent Meta and Warren Buffett’s Berkshire Hathaway.

Many are persuaded it will. “We’re talking about the path to building a trillion-dollar company,” said a partner at an investment firm that has backed OpenAI. “I don’t think this is unreasonable.”

The advent of generative AI represented “the biggest platform prize since cloud or the internet”, worth multiple trillions of dollars of economic value, they said.

Despite the huge scale of the fundraising, OpenAI has not struggled to attract demand, according to people with knowledge of the deal. As well as writing its own cheque to OpenAI, Thrive is also launching a special purpose vehicle through which other institutions can take a stake in OpenAI, they added.

The lofty hopes for OpenAI are remarkable even for Silicon Valley, where only a handful of Big Tech groups have grown to become trillion-dollar giants. Other big investors are sceptical that the OpenAI deal makes financial sense.

“How would you ever get to a venture-style return on an investment of this sort?” asked the chief investment officer of a US foundation. “I’m not sure what the maths is there, or if there is any maths.”

OpenAI, Thrive, Tiger and Sequoia declined to comment on the deal. Andreessen did not respond to a request for comment. MGX said it had “been continuously engaged in discussions with partners around the world regarding investments in the technology space”.

To achieve the desired returns on investment, OpenAI will need to overcome fierce competition from the wealthiest tech companies in the world such as Google and Meta. It must find the resources to train ever-more expensive models and manage the transition from a fast-growing, chaotic start-up to a corporate behemoth.

OpenAI’s revenues have shot up to about $3.6bn on an annualised basis since the launch of ChatGPT almost two years ago, according to people with knowledge of the group’s finances. But it is still burning through well over $5bn a year and is “not close to breaking even”, as it invests in new models and products in a bid to stay ahead of competitors.

While the cost of training cutting-edge models has winnowed competition, it also obliges start-ups to perpetually seek new investment. Billions more in capital would give OpenAI an edge over Anthropic and Elon Musk’s AI start-up xAI, both of which have raised multibillion-dollar rounds in recent months.

“I don’t think there are going to be 20 foundation model companies, certainly not unless costs come down,” said another investor in OpenAI. “You either win or you fade into obscurity and become MySpace.”

More important still could be closer ties to strategic investors. “[OpenAI] have Microsoft, the biggest enterprise company on the planet. If I could pick another partner it would be Apple, the biggest consumer company on the planet,” said one investor in the company.

“I’m walking into a gunfight with Google and Facebook and I have Microsoft and Apple behind me. It’s not such a bad thing from a distribution and branding perspective,” they added.

Others are deterred by the eye-watering scale of investment and fearful of being overly exposed to a single company. Both Sequoia and Andreessen have also invested in xAI rather than going all-in on OpenAI.

In addition, there are concerns about whether OpenAI can sustain its aggressive growth. The company was rocked by a boardroom crisis last November, in which chief executive Sam Altman was first ousted and then reinstated over a five-day period.

Plans to simplify OpenAI’s unique corporate structure, which came under scrutiny during that crisis, are being discussed. The current fundraising is not contingent on a restructure, according to multiple people with knowledge of the situation.

OpenAI has shed several senior researchers this year, including three of the group’s 11 co-founders. It has also been drawn into a string of legal battles — including high-profile cases against Musk, another co-founder who left in 2018, and the New York Times.

There are also signs of strain in the group’s relationship with Microsoft, which has committed $13bn to OpenAI and hitched its AI strategy to the start-up’s success. The companies are increasingly competing for customers, while Microsoft is building its own consumer AI team under Inflection founder Mustafa Suleyman and has designated OpenAI as a “competitor” in its annual report.

OpenAI’s backers say the company’s growing pains are typical for a hot start-up, drawing parallels to the early tumult at Google and Apple.

They point to a string of new hires, including Sarah Friar, OpenAI’s first chief financial officer, and a revamped board packed with corporate experience as a sign of a more sober approach.

“The stakes are high,” said one investor. “But there has never been a company that has both a dominant enterprise position and a dominant consumer position early on . . . this type of business tends to be ‘winner takes most’: you’re not going to have two ChatGPTs on your phone.”

Additional reporting by Stephen Morris in San Francisco

How will the U.S. Interest rates cut affect you?

The recent announcement from the US Federal Reserve as they made a significant cut to interest rates of 0.50% points marks the largest reduction in interest rates since 2020. Typically, the Federal Reserve adjusts rates by just 0.25 percentage points at a time, so this half-point cut is a substantial move designed to have a noticeable impact on the economy.

The cut brings the federal funds rate to a range between 4.5% and 4.75%, the lowest it has been in two years.

Their goal with this cut is to stimulate the US economy, encourage businesses to and consumers to borrow more money at lower rates. This should lead to more spending and in turn economic growth.

Why have interest rates been so high?

Interest rates in the US and globally have been at a record high over recent years due to a combination of pressures. COVID-19 caused economic disruptions and the supply chain issues that followed caused a surge in inflation in the US and globally. Consumer prices have been rising for goods like groceries, fuel and housing which has prompted the Federal Reserve to act.

They raised interest rates in several increments, hoping to cool down spending and borrowing, which in turn could help bring inflation under control. When borrowing costs increase, both consumers and businesses tend to spend less, slowing economic growth and reducing inflationary pressures. Over the past year, the federal funds rate had been raised to around 5%, one of the highest levels in decades.

This has had a substantial effect on the economy, the housing market has begun to cool due to higher mortgage rates and businesses pulling back on investments. Inflation has began to moderate as the Federal Reserve begins their balancing act to ensure inflation doesn’t reignite whilst avoiding a recession.

Why have they cut interest rates now?

While inflation has eased in recent months, there are concerns that the high interest rates were beginning to stifle growth too much. By making borrowing cheaper through this significant 0.50 percentage point cut, the Fed aims to boost both consumer spending and business investment. This recent cut should support economic growth in the US for 2025.

Lower interest rates can make it cheaper for businesses to expand, hire more employees, and invest in new technologies. For consumers, this can mean more affordable loans for things like homes, cars, and education. As borrowing costs decrease, individuals are more likely to take out loans, which in turn can drive up demand for goods and services, helping to boost the economy.

With reduced interest rates, consumers might feel more confident about making big-ticket purchases, such as homes or cars, knowing their monthly payments will be lower. In turn, this renewed confidence and spending can have a ripple effect, encouraging businesses to expand and invest more heavily, further stimulating the economy.

How the rate cuts affect the typical US family

This rate cut has several implications for US families, particularly when it comes to managing everyday expenses. One of the most immediate effects will be felt in mortgage rates. Families looking to buy a home or refinance their current mortgage may see lower interest rates, which can significantly reduce monthly payments. A 0.50% reduction in interest rates can translate to thousands of dollars saved over the life of a mortgage, making homeownership more affordable.

Those with credit card debt or personal loans may notice lower interest rates on their outstanding balances making it easier to manage repayments. Financing a new car or making large purchases will become more affordable as loans will be more accessible. This will allow families to have an increase in spending money which will be poured into the economy through purchases and days out.

How global markets are affected

Changes in U.S. monetary policy often ripple through global markets, and countries like the UK could be affected. For instance, the UK’s financial markets often move in tandem with the U.S., particularly in terms of bond yields and currency exchange rates. If U.S. interest rates decline, it can weaken the dollar, making other currencies like the British pound stronger in comparison. This can affect UK exports, making British goods more expensive for U.S. consumers.

US rates can also promote central banks such as, the Bank of England to consider their own policy adjustments.

The next announcement

the next major Federal Reserve decision is set for November 7th, just after the U.S. elections. The timing of this announcement has sparked debates about how political and economic factors will intersect. Many are questioning whether future rate cuts will continue or if the Fed will pause to reassess the state of inflation and economic growth post-election.

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It’s Lunch with the FT’s 30th birthday, and to celebrate, Henry Mance has been delving into our very colourful archives — indeed, we all have.

Here, FT readers and journalists guide you through their personal favourites. Any glaring omissions? Feel free to add your own in the comments below.

These comments have been edited for style and length

Money Marketing’s Weekly Must-Reads: Top 10 Stories

Stay ahead with our curated list of this week’s top 10 financial news stories.

Gain exclusive insights into pressing topics such as Tony Wickenden’s take on advising pre-emptive action to shield clients from CGT. Also, get the scoop on Sesame Bankhall’s latest hire to lead their adviser network.

Read more below:



Tony Wickenden: Should you advise pre-emptive action to save clients from CGT?

Tony Wickenden discussed the potential impact of rising capital gains tax (CGT) following Budget warnings. He noted the government’s reluctance to increase income tax, National Insurance, or VAT, leading to speculation about CGT increases. Wickenden suggested that if clients are already planning disposals, they should consider completing them sooner. He highlighted concerns that higher CGT rates might prompt wealthy individuals to defer gains. He also mentioned potential mid-year changes and the importance of balancing tax considerations with investment decisions.

Sesame Bankhall hires new director to lead adviser network

Phoenix Group scraps plans to sell protection business

Phoenix Group cancelled plans to sell its SunLife protection business, citing uncertainty in the protection market. Instead, the company will focus on enhancing SunLife’s value, as it remains a key asset serving the UK’s over-50s market. Phoenix had acquired SunLife from AXA in 2016. The decision was announced in Phoenix’s 2024 interim results. CEO Andy Curran highlighted growth in the Workplace business and the expansion of the Group’s retirement offerings, including a fixed-term annuity launched by Standard Life.

Close Brothers sells asset-management business

Steven Cameron: Is it time? What flat-rate pensions tax relief would look like

Steven Cameron explored potential pension tax reforms ahead of the 30 October Budget, speculating that Chancellor Rachel Reeves might introduce a flat-rate tax relief system. Currently, tax relief is given at an individual’s marginal rate, benefiting higher-rate taxpayers. A move to a 30% flat rate would favour basic-rate taxpayers but reduce relief for higher earners. Employer contributions could also face changes, possibly affecting defined benefit schemes. Cameron urged advisers to discuss possible changes with clients and consider making extra pension contributions before the Budget.

Andy Bell: Where will Labour find £22bn?

Andy Bell discussed how Labour might address the UK’s £22bn fiscal deficit without raising VAT, income tax, or National Insurance. He suggested potential reforms to capital gains tax (CGT), pension tax relief, inheritance tax (IHT), and the introduction of a wealth tax. Aligning CGT with income tax rates and introducing a flat-rate pension tax relief could raise revenue but may face backlash. A wealth tax and IHT adjustments also carry challenges, including political risks and administrative complexity. Bell stressed the need for balanced, fair policy design.

Brooks Macdonald to acquire Norwich-based financial advice firm

Brooks Macdonald announced the acquisition of Norwich-based Lucas Fettes Financial Planning, subject to regulatory approval by early 2025. Lucas Fettes manages £890m in assets across 1,600 personal clients and £300m from corporate clients. The acquisition aims to enhance Brooks Macdonald’s financial planning capabilities and expand its presence in East Anglia. Lucas Fettes, one of Brooks’ top introducers since 1996, will integrate into Brooks Macdonald’s direct wealth business, aligning with the group’s strategy to focus on UK investment management and financial planning.

Octopus Investments launches IHT and estate planning helpdesk

Octopus Investments launched ‘Ask Octopus,’ a helpdesk offering technical support on inheritance tax (IHT) and estate planning for financial advisers. The service, accessible via their website, provides answers to advisers’ queries and allows direct meetings with experts. It covers IHT rules, estate planning, wills, and probate. Octopus aims to assist advisers, particularly those without technical team support. This launch comes as IHT receipts have surged, prompting calls for reform ahead of Chancellor Rachel Reeves’ 30 October Budget.

Skerritts buys Harrogate-based advice firm

Skerritts Group acquired Harrogate-based Ellis Bates Financial Advisers, adding over £1bn in assets under management and strengthening its presence in Northern England. The deal, backed by Sovereign Capital Partners, was set to complete in September 2024. Skerritts, aiming for national expansion, has made 11 acquisitions since Sovereign’s £55m investment in 2021. Skerritts CEO Paul Feeney praised the acquisition, while Ellis Bates’ managing director Michael Cope highlighted shared values and ambitions for growth within the partnership.

Advisers tweak processes in light of retirement income review

Following the Financial Conduct Authority’s (FCA) thematic review of retirement income advice, most financial advisers adjusted their processes, according to Wesleyan. The FCA’s March 2024 review highlighted areas for improvement, including income withdrawal strategies and advice suitability. Wesleyan’s poll revealed that 91% of advisers familiar with the review reassessed their practices, with 66% already implementing changes. Common adjustments included advice file record-keeping and client screening. Over three-quarters of advisers agreed the review heightened the focus on providing better retirement advice.