OpenAI has just made history by securing the largest venture capital round ever, raising a staggering $6.6 billion. This latest funding round, led by Thrive Capital, now values the AI research company at an eye-watering $157 billion, placing it firmly among the top three most valuable private startups globally. With this milestone, OpenAI is positioned behind only ByteDance (parent company of TikTok) and SpaceX in terms of valuation.
Backed by industry giants like Microsoft, NVIDIA, and SoftBank, OpenAI’s journey has been nothing short of meteoric. From its early beginnings in 2016, when it was initially structured as a non-profit focused on freeing AI from corporate control, the company has since transitioned into a for-profit model, with major investments from tech behemoths. This latest round further cements its dominance in the AI space, as it continues to spearhead advancements in artificial intelligence, most notably through its widely used AI-powered platform, ChatGPT.
With revenue projections estimated to reach $3.4 billion in 2024, $12 billion by 2025, and even higher figures by 2029, OpenAI is well on its way to becoming a major force in the technology industry. While the company is still incurring heavy losses—projected to be around $5 billion this year—these are largely attributed to the intensive costs of training its advanced AI models.
A Broader Trend in AI Valuations
However, OpenAI’s success is not an isolated event. The past few years have seen an unprecedented surge in the valuations of AI companies across the board, even for firms with modest revenue figures. Companies like Character AI, SSI (led by Ilya Sutskever), and Poolside AI are commanding valuations of $5 billion, $5 billion, and $3 billion, respectively. Combined, 12 prominent AI firms, including Magic, Codeium, and Adept, have a collective valuation of $21.75 billion, despite generating less than $100 million in revenue.
This highlights a broader trend within the AI industry: massive investments are being funnelled into companies based on their future potential rather than their current financial performance. Investors are betting on the transformative power of AI, with the expectation that these companies will revolutionise various industries—from healthcare to finance to entertainment.
Consulting Firms Reaping Immediate AI Rewards
Interestingly, while AI-native companies are being valued highly for their long-term promise, it’s traditional consulting firms that are currently capitalising on AI’s commercial potential. Accenture, for instance, reported $3 billion in Generative AI-related bookings in the past fiscal year, a tenfold increase from the previous year. Similarly, Boston Consulting Group now derives 20% of its revenue from AI-related work, and McKinsey & Company reported $16 billion in revenue in 2023, with around 40% of its projects tied to AI.
The contrast is striking: consulting firms are making more from AI right now than many AI companies themselves. They have been able to deploy AI technologies to solve immediate business challenges for clients, delivering value faster than the AI developers who are still building the products that will shape the future.
The Road Ahead for AI Companies
As OpenAI leads the charge with its record-breaking raise, the future of AI remains exciting and unpredictable. The company’s ambitious revenue projections and rapid innovation in AI model development suggest that it could eventually eclipse even its current valuation. Yet, for many other AI companies with sky-high valuations, the challenge will be to turn their potential into actual revenue in the years to come.
In the meantime, consulting firms seem to be bridging the gap between AI’s potential and its practical application, generating significant revenue from the technology in the present.
With OpenAI’s continued growth and the broader AI boom, the race to monetise AI has only just begun.
