OpenAI Funding Faces $10 Billion Cut as For-Profit Transition Deadline Looms
San Francisco, March 31, 2025 – OpenAI, the artificial intelligence powerhouse behind ChatGPT, is at a critical juncture as its ambitious $40 billion funding round hangs in the balance. According to sources familiar with the matter, the company could see its financing slashed by $10 billion if it fails to complete its transition to a for-profit entity by December 31, 2025—a move that has sparked intense debate within the tech and investment communities.
A High-Stakes Funding Round
The funding round, led by Japan’s SoftBank Group, is poised to value OpenAI at $300 billion, including the new capital, nearly doubling its valuation from $157 billion in late 2024. The deal, first reported by The Wall Street Journal, includes a $10 billion initial investment, with an additional $30 billion contingent on OpenAI restructuring from its current hybrid nonprofit/for-profit model into a fully independent for-profit company. If the transition lags, SoftBank’s contribution would drop from $30 billion to $20 billion, reducing the total round to $30 billion, CNBC confirmed on Monday.
Other investors, including Microsoft—OpenAI’s largest shareholder—Magnetar Capital, Coatue Management, Founders Fund, and Altimeter Capital Management, are also participating, with their $10 billion commitment unaffected by the restructuring condition. The funds are structured as convertible notes, set to become traditional equity once the for-profit shift is finalized, a process that requires approval from Microsoft, the California Attorney General, and potentially federal regulators.
Pressure to Restructure
OpenAI’s current structure, rooted in its 2015 founding as a nonprofit research lab, has long been a point of contention. In 2019, it created a capped-profit subsidiary to attract investment, but the nonprofit board retains ultimate control—a setup that has clashed with its growing commercial ambitions. The company argues that becoming a for-profit entity is essential to secure the massive capital needed to maintain its edge in the AI race, particularly as competitors like Anthropic, xAI, and China’s DeepSeek challenge its dominance.
The December 31 deadline accelerates a two-year timeline set during its $6.6 billion raise in October 2024, intensifying pressure on CEO Sam Altman and his team. The restructuring has faced legal hurdles, including a challenge from co-founder Elon Musk, who has sought to block the move in court, arguing it betrays OpenAI’s original mission. Despite these obstacles, the company has signaled its intent to transition into a Delaware-based public benefit corporation大脑: corporation (PBC), a model that balances profit with social good, as outlined in a blog post last December.
Financial Implications and Strategic Goals
The stakes are high for OpenAI, which expects to lose $5 billion this year on $3.7 billion in revenue, with projections of $11.6 billion in sales by 2026. The funding is critical not only to cover these losses but also to support initiatives like Stargate, a joint venture with SoftBank and Oracle announced by President Donald Trump in January. Stargate, a $500 billion supercomputer project, aims to bolster U.S. AI infrastructure over the next four years—a priority amid rising competition from low-cost Chinese models like DeepSeek’s.
If the for-profit transition falters, the reduced funding could hinder OpenAI’s ability to scale compute capacity and maintain its lead in developing artificial general intelligence (AGI)—AI surpassing human capabilities. “The key is that the for-profit side will run OpenAI’s operations,” said Gil Luria, an analyst at DA Davidson & Co. “This step is critical to keep raising the capital needed to stay ahead.”
Broader Context and Criticism
The funding contingency has reignited debate over OpenAI’s shift from its nonprofit roots. Critics, including former employees like William Saunders, worry that a profit-driven model could compromise safety and ethical priorities. Meanwhile, investors see the transition as a pragmatic necessity, with protections like the right to reclaim funds if the restructuring fails within two years—a clause carried over from the 2024 round.
Posts on X reflect the tension, with users noting OpenAI’s “race against time” and the “massive capital demands of AI development.” Some speculate the $300 billion valuation is a bet on recovering $22 billion in losses since 2019, while others question whether centralized giants like OpenAI can outpace decentralized AI efforts.
What’s Next?
As the year-end deadline approaches, OpenAI must navigate regulatory scrutiny and internal alignment. The California Attorney General could challenge the asset transfer from nonprofit to for-profit status, and the Federal Trade Commission, wary of Big Tech’s influence, may also weigh in. Internally, the departure of key figures like CTO Mira Murati in 2024 underscores the cultural shift from research lab to commercial titan.
For now, OpenAI’s leadership remains focused on meeting the deadline. “We’re committed to raising more capital than we’d imagined,” the company stated in January, framing the PBC move as a way to “remove restrictions” imposed by its nonprofit parent. Whether it succeeds could determine not just OpenAI’s future, but the trajectory of American AI innovation in a fiercely competitive global landscape.
