OpenAI cuts funding target to $20 billion

OpenAI is seeking to raise up to $20 billion in a new funding round, a reduction from its earlier target of up to $30 billion. The company set a deadline for investors to commit by Friday, with some backers choosing to lower their allocations.

The Financial Times first reported the $10 billion cut and the new post-money valuation of $1.25 trillion. A person directly familiar with the deal told CNBC that the round is still in progress and the figures remain subject to change. OpenAI did not immediately respond to a request for comment.

Investors from the United Arab Emirates are leading the round alongside Coatue. This decision follows a week of market uncertainty regarding returns on artificial intelligence infrastructure spending, particularly for data centers and GPUs.

AI-linked stocks dropped on Friday. Intel fell 25% after issuing weak revenue guidance, while Micron declined 5.5% and Nvidia lost 4%. Major tech firms had previously increased spending to meet AI demand, but recent figures came in below analyst estimates.

Alphabet experienced its worst trading day on Thursday after search revenue missed expectations. Philipp Schindler, the company's chief business officer, said the impact was partly due to lower monetization within the company's AI Mode. Microsoft and Amazon also issued capital expenditure figures or forecasts last week that fell short of expectations.

The reduction in OpenAI's funding goal comes as the market reassesses the financial viability of massive AI infrastructure projects. The round has not yet closed, and final terms are still being negotiated.