An OpenAI Initial Public Offering (IPO) is perhaps the world’s mostly highly anticipated stock market launch, competing only with SpaceX and ByteDance in terms of potential popularity.

While highly speculative, retail investors too young to invest in the early days of the Magnificent Seven may consider an IPO a similarly valuable once-in-a-generation opportunity — to invest in a business which could eventually become worth trillions of dollars.

When could the OpenAI IPO take place?

At the Madrona IA Summit in Seattle in October 2024, OpenAI backer Brad Gerstner of Altimeter Capital argued it is ‘total nonsense’ that companies need $1 billion in revenue before launching an IPO.

He advised ‘I hope and expect that the next step for OpenAI would be to go public. Having the opportunity for every retail investor in America to share in the upside that gets created by AI at a time we’re going to have massive social disruption, jobs lost, and other things, I think it’s critically important.’

However, before an IPO could take place, OpenAI would need to change its nonprofit structure to become a for-profit company, which could take some time. OpenAI has promised it will achieve this within the next two years and has promised it will return capital to investors if it misses the deadline. However, it will also retain the nonprofit segment as a separate entity.

There are three key arguments in favour of an IPO: first, the public markets offer the company the deeper liquidity OpenAI will need to achieve its ambitions. Second, this liquidity is necessary for OpenAI’s venture capital backers to make an exit. And third, the company has publicly noted it does not want too many investors which also back its top competitors. This is inevitably going to become more of an issue the longer it raises capital from the same small group of venture capital firms.

However, founder and CEO Sam Altman — who was briefly fired in late 2023 before being rehired — remains nervous that an IPO would restrict the company’s ability to develop AI freely. Altman recently noted that ‘When we develop superintelligence, we are likely to make some decisions that most investors would look at very strangely.’

For context, an IPO generally provides liquidity at the expense of corporate freedom. However, new CFO Sarah Friar previously led publicly listed Nextdoor and Block and may have been hired at least in part to help navigate the complexities of being listed.

How to buy OpenAI shares if the company lists

If OpenAI do end up listing in the US, you can buy their shares from £0 commission with us. That's the rate if you've traded 3+ times in the previous calendar month, otherwise our standard fee is £10.

You'll be able to invest in OpenAI right away on the day of the listing.

1. Do your research on IPOs
2. Open a share dealing account
3. Search for OpenAI on our share dealing platform
4. Choose the number of shares or amount of money you wish to invest
5. Place your deal

When dealing shares, you own the stock and become a shareholder in the company. You'll profit if the share price rises above the point at which you bought, or potentially from any dividends paid. You could get back less than you put in.

You can also trade the OpenAI IPO using leverage through a variety of products with us. This means you could gain or lose money quickly and could end up losing more than your initial deposit. This is higher risk and requires thorough risk management.

Read more about IPOs:

• Upcoming IPOs to watch
• How to trade or invest in IPOs
• Trading IPOs on our platform

What will OpenAI be valued at and what will the share price be?

OpenAI raised $6.6 billion in a private fundraising round during early October 2024 at a $157 billion valuation. Thrive Capital led OpenAI’s oversubscribed round, joined by Nvidia, Microsoft, Fidelity, Altimeter Capital Management, Khosla Ventures, SoftBank, MGX and Tiger Global.

Pitchbook data now suggests that the San Francisco company is worth substantially more than any venture capital-backed firm at the time of their IPO, including both Meta Platforms and Uber.

For context, OpenAI is now the third most valuable venture capital-backed company in the world, second only to SpaceX and TikTok owner ByteDance. Another AI firm, Elon Musk-founded xAI, raised more than $6 billion on a $24 billion valuation earlier this year, but this involved significantly more dilution than that suffered by OpenAI investors.

As a private company, OpenAI is not required to disclose its finances on a quarterly basis. But’s it’s worth noting that OpenAI’s capital expenditure is going to be high as its AI models require significant capital to create and develop.

However, The New York Times has seen company documents suggesting that OpenAI expects to lose $5 billion while generating $3.7 billion in revenue in 2024. The paper also quoted an anonymous company source saying that OpenAI generated $300 million in revenue in September 2024, an increase of 1,700% compared to September 2023.The same source also notes the company expects to generate $11.6 billion in sales next year.

The share price at launch will likely be at least $100 and possibly more, in keeping with the premium share prices of the major tech stocks.

What is OpenAI’s business model?

OpenAI generates the lion’s share of its revenue from licensing its platform and services to other companies, including integrating their own data and algorithms. OpenAI also licences its technology separately to other companies and is a key beneficiary of US government grants and corporate donations.

Perhaps an underrated component of the business model is the strategic partnerships with organisations which align with its mission. OpenAI was initially founded in 2015 as a nonprofit organisation with the goal of developing safe and beneficial artificial intelligence for humanity — and has since received billions in funding from Microsoft, Nvidia, and SoftBank among others.

This is not charity; Microsoft enjoys the rights to 75% of OpenAI's profits until Microsoft earns back the billions it has invested and will likely end up owning 49% of the smaller firm.

And the growth trajectory is inarguable. OpenAI’s flagship ChatGPT acquired one million users just five days after launching back in November 2022. By comparison, Instagram took circa 10 weeks, and Netflix three and a half years, to reach the same milestone.

As of October 2024, ChatGPT has over 200 million active users each week, making it the fastest-growing consumer application in history. Interestingly, while 92% of Fortune 500 companies use OpenAI's products, only 12% of users are Americans — which makes ChatGPT both firmly ensconced in US business while also maintaining a global presence.

As noted above, OpenAI was initially launched as a nonprofit, but to fund development currently operates under a revised capped-profit structure — where investors and employees of OpenAI can participate in profits up to a defined cap. Pre-IPO, the company plans to completely separate these two divisions.

There are plenty of potential competitors — including Watsonx AI, Google DeepMind, Mistral AI, xAI, Anthropic, Contextual AI, Cohere, Hugging Face, Baidu AI, and Meta AI — and many of their parents are invested in OpenAI. But none have captured the imagination of the investing public to the same degree.

Why are there OpenAI ethical concerns?

There are all sorts of ESG issues to consider. At a more immediate level, concerns over copyright and plagiarism issues persist, as do worries about AI replacing workers. Longer-term, the company is attempting to create general artificial intelligence which mimics human-like intelligence — creating all sorts of philosophical issues.

A significant consideration is that the field of AI is evolving so quickly that it is very difficult to regulate — and even where regulation exists, it is often implemented by individuals without sufficient expertise in the subject matter. Then there’s the massive energy and metals requirements of the data centres needed to run AI applications, alongside the potential military applications.

OpenAI-related investments

While investors wait for the OpenAI IPO, there are plenty of ways to gain indirect exposure to the company. Perhaps the most obvious is through Microsoft, which has invested billions into the company and enjoys a strong symbiotic relationship through the Azure platform. And as already noted, once Microsoft has recovered its full investment from OpenAI’s profits, it should own 49% of the developer.

Microsoft has already incorporated OpenAI technology into its Bing search engine, alongside the Microsoft 365 suite and Copilot.

For investors seeking a little more diversification, there are hundreds of AI-focused ETFs which host Microsoft alongside other OpenAI backers. Popular choices include the Vanguard Information Technology ETF and the Fidelity MSCI Information Technology Index ETF which both count Microsoft, Nvidia and Broadcom as top holdings.

OpenAI IPO summed up

• OpenAI is currently valued at circa $157 billion
• Industry titan Microsoft is the company’s largest investor
• OpenAI developed and markets the extremely popular ChatGPT chatbot
• The business hopes to remain a global leader in artificial intelligence development
• The OpenAI IPO may be some time away, but you can invest indirectly through Microsoft