Microsoft (MSFT)-backed OpenAI, the owner of ChatGPT, has closed a record-breaking $40 billion funding round, making it the largest private tech investment in history. This news comes amid a buzz on the internet over Ghibli-style portraits, following OpenAI’s ChatGPT launch of an advanced image-generation feature that allows users to transform photos into animations. Meanwhile, the latest funding boosts OpenAI’s post-money valuation to $300 billion, nearly doubling its previous $157 billion valuation from October.
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According to CNBC, SoftBank (SFTBY) led the investment with $30 billion, with participation from existing backers Microsoft, Coatue, Altimeter, and Thrive. The confirmation followed a Bloomberg report last week, revealing that OpenAI is nearing the completion of a funding round.
OpenAI’s $40B Funding to Fuel AGI Ambitions
As outlined in a blog post, OpenAI plans to use the new funding to accelerate AI research, focusing on AGI (artificial general intelligence). The investment will also support the expansion of its computing infrastructure and generative AI systems, as it faces growing competition from Chinese rivals.
The funding deal will grant OpenAI an initial $10 billion, with $7.5 billion from SoftBank and $2.5 billion from a group of investors. However, there’s a condition: the remaining $30 billion will be available by year-end, contingent upon OpenAI’s transition to a for-profit model. The condition increases pressure on OpenAI to complete its for-profit conversion, a plan requiring approval from Microsoft and the California Attorney General while facing legal challenges from Elon Musk. Notably, Musk was a co-founder of OpenAI, which was initially established as a non-profit research lab in 2015.
Meanwhile, CNBC reported that about $18 billion of the capital will be directed towards OpenAI’s participation in Stargate. In context, Stargate is a joint venture between SoftBank, OpenAI, and Oracle (ORCL), which was announced by President Donald Trump in January.
Is MSFT Stock a Buy?
Microsoft’s strategic investment in OpenAI has strengthened its position in the AI space, aligning the company with cutting-edge technological advancements.
As an investment, MSFT stock continues to attract strong confidence from Wall Street, with a consensus Strong Buy rating on TipRanks. That rating is based on 32 Buys and two Holds assigned in the last three months. The average MSFT price target of $510.03 implies a 36% upside potential from current levels.
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