OpenAI Cuts Valuation To $1.25 Trillion Amid AI Trade Wobble
OpenAI has cut its valuation to $1.25 trillion, amid a wobble in the AI trade, according to SaaStr. This move may signal a shift in the AI market, with investors becoming more cautious.
Original reporting · saastr.com
Original: “20VC x SaaStr: OpenAI Cuts to $1.25 Trillion, Anthropic’s Growth Goes From 12x to 2x, and Why Agents Are an Existential Risk to DoorDash”
Read “20VC x SaaStr: OpenAI Cuts to $1.25 Trillion, Anthropic’s Growth Goes From 12x to 2x,…” at SaaStr →How this was written. Awesome B2B Growth wrote this article with a language model from SaaStr’s reporting (model: @cf/meta/llama-3.3-70b-instruct-fp8-fast); it describes that reporting rather than adding to it. The original, linked above, is the full story.
Key points from SaaStr’s report
- OpenAI has cut its valuation to $1.25 trillion amid a wobble in the AI trade.
- Anthropic's growth has slowed down, from 12x to 2x, due to pricing pressure.
- The shift in the AI market is affecting other companies, such as Canva, Squarespace, and Wix.
- The uncertainty in the AI market is causing volatility in public markets and binary outcomes in venture investments.
- The demand for AI products is still high, but the supply side is experiencing price discovery.
The AI trade has experienced a significant wobble, with OpenAI cutting its valuation to $1.25 trillion, according to SaaStr. This move comes after a busy week in the tech industry, with Alphabet losing around $500 billion in market cap and DoorDash buying Instacart for $17 billion.
OpenAI has secured around $11 billion of the $30 billion it sought, and now aims for up to $20 billion at a $1.25 trillion valuation, per the WSJ, FT, and CNBC. The company initially pitched a valuation of $1.4 trillion but cut it to $1.25 trillion a week before the deadline, as tech stocks were falling after the results from Google, Amazon, and Intel.
Rory O'Driscoll believes that the AI wave is not cracking, but rather, it is a simple pricing question. He thinks that people are projecting their own biases onto what is really a matter of supply and demand. On the other hand, Jason agrees with the logic but is still nervous, citing the $5 trillion loss in AI stocks and the guarantee of Anthropic's debt by Broadcom.
Anthropic's quarterly S-1 amendment showed a slowdown in growth, from 12x to 2x. The company's GAAP revenue went from around $5 billion in Q1 to $11 billion in Q2 and $17 billion in Q3. However, net new revenue dropped slightly from Q2 to Q3, despite absolute bookings going up. Rory attributes this to a sustained slowdown, while Jason believes it is due to pricing pressure.
The slowdown in Anthropic's growth may be caused by pricing pressure, with OpenAI selling equivalent products at 30% off. Jason cites his own experience with SaaStr Connect, where total costs fell 72% after moving to a cheaper model mix. This deflation may affect Anthropic's ability to charge a premium.
The shift in the AI market is also affecting other companies, such as Canva, Squarespace, and Wix. Reports suggest that Canva's growth has slowed, and the company is preparing layoffs. Squarespace has announced 20% layoffs, and Jason has turned off Canva after 12 years, citing the use of alternative tools such as Higgsfield and Opus.
The uncertainty in the AI market is causing volatility in public markets and binary outcomes in venture investments. Harry Stebbings believes that nobody knows what the next five years will look like, making it challenging for companies to navigate the changing landscape.
Questions and answers
What is the current valuation of OpenAI?
OpenAI has cut its valuation to $1.25 trillion, according to SaaStr.
Why has Anthropic's growth slowed down?
Anthropic's growth has slowed down due to pricing pressure, with OpenAI selling equivalent products at 30% off, according to Jason.
How is the shift in the AI market affecting other companies?
The shift in the AI market is affecting other companies, such as Canva, Squarespace, and Wix, with reports of slowed growth and layoffs, according to SaaStr.
