Why is OpenAI lowering its valuation to $1.25 trn ahead of potential IPO?

OpenAI has reportedly reduced its targeted valuation to $1.25 trillion from $1.4 trillion after some investors expressed reluctance to commit funds at the higher price, according to the Financial Times. The ChatGPT maker is seeking to raise $30 billion in fresh capital ahead of a potential stock market listing in 2027.

Despite the reduction, the revised valuation would represent an increase of nearly 50 per cent from the company's current valuation of $852 billion. The move, however, points to growing investor caution towards artificial intelligence (AI) companies amid market volatility and concerns over the escalating costs of AI infrastructure.

Why OpenAI revised its valuation target
According to the Financial Times, OpenAI is in the final stages of arranging its latest funding round, although investor demand has reportedly been weaker than in previous fundraising efforts.

Morgan Stanley and investment firm Dragoneer had earlier informed the bank's private wealth clients that OpenAI was seeking a valuation of $1.4 trillion before the new investment. However, some prospective investors were reportedly unwilling to invest at that price, prompting the company to lower its target.

The revision comes as US technology stocks face selling pressure, with investors increasingly questioning whether massive investments in AI infrastructure, including data centres and computing capacity, will generate sustainable returns.

Concerns about rising operating costs and the substantial capital required to develop advanced AI systems have also contributed to investor caution. Some investors are reportedly experiencing funding fatigue after committing significant amounts to AI companies over recent years.

Funding plans and potential IPO in 2027
OpenAI has raised substantial capital to support its expansion and growing computing requirements. The company secured $40 billion in March 2025, followed by a reported $122 billion funding round in March 2026.

Its latest fundraising effort aims to secure up to $30 billion to support operations and expansion ahead of a potential initial public offering (IPO). According to the Financial Times, the listing could take place in the first half of 2027.

Investment group Coatue and funds based in the United Arab Emirates are reportedly in discussions to lead the latest funding round.

What the valuation cut signals
The reported adjustment highlights the challenges facing major AI companies as they seek to balance ambitious growth plans with investor expectations for long-term profitability.

While demand for AI technologies continues to drive investment, the high cost of developing models and maintaining computing infrastructure has intensified scrutiny of company valuations.

For OpenAI, securing fresh capital will be important to sustaining its expansion plans ahead of a potential public listing. The outcome of the funding round could also provide an indication of how investors value leading AI companies amid changing market conditions.