OpenAI's $500B Valuation: Is It the Most Valuable Startup Ever?
OpenAI, the generative AI powerhouse, is reportedly on the cusp of an eye-watering $500 billion valuation, a figure that would crown it the world’s most valuable private company. This staggering sum would place it ahead of tech titans like SpaceX and TikTok parent ByteDance, and even surpass the market capitalization of public entities such as Palantir – a remarkable feat for a company simultaneously grappling with an “astronomical burn rate.”
The reported valuation actually stems from two distinct financial maneuvers. One is a SoftBank-led funding round, anticipated to close by year’s end, which values the company at $300 billion. The other, and more talked-about, is a secondary sale of employee shares commanding a far steeper $500 billion valuation. While most of the more affordably priced shares from the SoftBank round have already been acquired, investors are now actively competing for the pricier secondary shares.
One anonymous OpenAI investor, speaking under the condition of anonymity due to a non-disclosure agreement, described the current moment as akin to the dawn of the internet. This investor believes the scale of technological shifts continues to exceed expectations, arguing that the math for investing at the $500 billion valuation is surprisingly straightforward. Their optimistic projection posits that if ChatGPT were to reach 2 billion users and monetize at just $5 per user per month – half the rate of giants like Google or Facebook – it would generate $120 billion in annual revenue. Such a scenario, they contend, could alone support a trillion-and-a-half-dollar company, offering a substantial return even before accounting for OpenAI’s other ventures in enterprise solutions, agentic AI, and hardware development.
However, such projections, while compelling, come with considerable caveats. The hypothetical $5 per user per month figure is, by the investor’s own admission, a “back-of-the-envelope” calculation. Currently, ChatGPT boasts 700 million weekly active users, yet fewer than 10 percent of them are paying subscribers. Arun Sundararajan, a professor at New York University’s Stern School of Business, highlights the critical “half-a-trillion-dollar question”: to what extent will OpenAI be able to retain its rapidly expanding user base while simultaneously reining in costs to achieve that hypothetical $5 per user monetization? The underlying bet for investors buying in at the $500 billion mark is that OpenAI will become the next Facebook or Google. Glenn Okun, another NYU business professor, suggests that these investors are likely anticipating an IPO valuing the company above a trillion dollars within two to three years; otherwise, the expected rate of return would not justify their investment. This would mean OpenAI would need to leap into the top 10 most valuable public companies globally almost overnight.
Despite these formidable challenges, OpenAI’s recent performance has been nothing short of explosive. In the first seven months of 2025 alone, the company reportedly doubled its projected annual revenue to $12 billion, translating to approximately $1 billion per month. Enterprise adoption has surged, with 5 million paying business users this month. The potential for future advertising revenue could further bolster its bottom line. To the optimistic investor, these are clear indicators of a company with unstoppable momentum, demonstrating an unprecedented pace of revenue growth and AI technological advancement that defies conventional pattern-matching.
This rapid expansion, however, comes at an astronomical cost. OpenAI is reportedly expecting a cash burn of $8 billion this year. Sam Altman, OpenAI’s CEO, has openly discussed a projected cash burn of $8 billion this year, and even mused at a recent dinner about spending “trillions of dollars” on data centers in the “not very distant future” to support inference – the real-time processing of user queries. This implies that in a fantastical future where ChatGPT serves billions, the cost to operate it would indeed run into trillions. Scaling such a power-hungry technology is extraordinarily expensive; even if chips become faster and cheaper, overall costs continue to escalate as the company trains ever-larger models and serves a growing user base generating billions of queries. While the optimistic investor dismisses profitability concerns, arguing that massive infrastructure costs can be diffused across a vast user base, NYU’s Glenn Okun remains more skeptical, asserting that such valuations may prove very difficult to actually reach given the required capital investment.
The $500 billion headline itself comes with caveats, reflecting the dynamics of private markets where pricing is often influenced by what a small number of eager investors are willing to pay for a limited number of shares. Okun views the figure as an approximation, encompassing both the firm’s intrinsic value and the intense competition among investors for a slice of the pie, making it difficult to disentangle the two. Indeed, recent PitchBook data highlights a significant concentration of venture capital, with a third of all dollars in the second quarter of this year flowing into just five AI companies, more than double the investment seen in 2024. Sam Altman himself has acknowledged the presence of a “bubble” in the AI space, but in characteristic fashion, he framed it positively, suggesting that bubbles often arise from “a kernel of truth,” much like the internet boom.
Ultimately, OpenAI’s journey thus far has defied conventional wisdom, marked by unprecedented technological breakthroughs and astonishing financial growth. Its colossal valuation hinges on a compelling narrative – one where ChatGPT becomes as ubiquitous and indispensable as Google, where billions willingly pay for its services, and where competitors fade into the background. For now, the story alone is worth half a trillion dollars, but as one investor aptly put it, “The story is not fully written.”