TNB Tech Minute: OpenAI’s $40 Billion Funding Round Has a Catch

Summary

WSJ Tech Minute: OpenAI’s $40 Billion Funding Round Has a Catch

Release Date: March 28, 2025
Host: Victoria Craig
Podcast: WSJ Tech News Briefing
Episode Title: TNB Tech Minute: OpenAI’s $40 Billion Funding Round Has a Catch

Introduction

In this episode of the WSJ Tech News Briefing, host Victoria Craig delves into significant developments within the tech industry, focusing on OpenAI's massive funding round, the stock market performance of CoreWeave, and a high-profile presidential pardon involving Trevor Milton, the founder of Nikola.

OpenAI's Historic $40 Billion Funding Round

Victoria Craig begins by unveiling an exclusive report on OpenAI, the parent company of ChatGPT, which is on the verge of securing a groundbreaking $40 billion funding round. This infusion of capital would position OpenAI's fundraising efforts as one of the largest in startup history. However, this substantial investment comes with stringent conditions.

Key Details:

• Restructuring Requirement: OpenAI, currently a nonprofit entity, must successfully transition into a for-profit organization to fully secure the $40 billion. Failure to do so would result in Lead Invest SoftBank reducing the funding size by half.
• Underlying Pressure: The impetus for this restructuring stems from internal turmoil in late 2023 when Sam Altman was briefly ousted as CEO. The board cited inconsistencies in Altman's honesty as a core issue, prompting investors to believe that the nonprofit structure posed excessive risks.
• Industry Implications: News Corp., the owner of the Wall Street Journal, has a content licensing partnership with OpenAI, highlighting the interconnectedness of major media and tech enterprises.

CoreWeave's NASDAQ Debut: A Stark Contrast

Shifting focus to the stock market, Craig reports on CoreWeave's highly anticipated IPO on the NASDAQ Stock Exchange. Initially projected to be one of the year's most exciting market entries, CoreWeave's debut fell short of expectations.

Performance Highlights:

• Initial Trading: CoreWeave began trading approximately four hours post the market’s opening, slightly under its IPO price of $40.
• Price Fluctuations: Although the stock eventually surpassed the $40 mark during the session, it remained significantly below the projected range of $47 to $55 established during the roadshow.

Investor Sentiment: The tepid response to CoreWeave's IPO is indicative of a cooling demand for AI-focused startups, reflecting broader market hesitations about the sustainability of the current AI investment boom.

Expert Insight: Corey Driebush of The Wall Street Journal provides analysis on investor concerns:

“There are company-specific issues and investors said, no, we don't really want to pay that much. And they also had concerns about the sustainability of the AI boom. And obviously companies right now are spending hundreds of billions of dollars on AI.”
— Corey Driebush [02:11]

Presidential Pardon: Trevor Milton's Case

In a notable political development, President Trump exercised his pardon power to absolve Trevor Milton, the founder of Nikola, an electric truck manufacturer that has since gone bankrupt.

Background on Trevor Milton:

• Conviction: Milton was found guilty of securities and wire fraud in 2022, accused of deceiving investors about Nikola's sales figures and the actual performance capabilities of its vehicles.
• Legal Proceedings: Despite maintaining his innocence, Milton was sentenced to four years in prison. He has remained out on bond pending his appeal, during which the presidential pardon was granted.
• Implications: This pardon not only underscores the ongoing tensions between political influence and legal accountability but also highlights the precarious nature of leadership within high-tech startups.

Conclusion

Victoria Craig wraps up the episode by emphasizing the intricate dynamics shaping the tech landscape, from massive funding endeavors and challenging IPOs to significant legal and political maneuvers. For listeners seeking a more comprehensive exploration of these topics, the episode directs them to the forthcoming Monday's Tech News Briefing podcast.

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Note: This summary encapsulates the key discussions and insights presented in the March 28, 2025 episode of the WSJ Tech News Briefing, providing a comprehensive overview for those who have not listened to the original podcast.

Transcript

[A]

This episode is brought to you by Universal Pictures. Today's the day. From Universal Pictures and Blumhouse come a storm of terror from the director of the Shallows the Woman in the Yard don't let her in. Where does she come from? What does she want? When will she leave? The Woman in the Yard in theaters now.

[B]

Here'S your TNB Tech minute for Friday, March 28th. I'm Victoria Craig for the Wall Street Journal. We're exclusively reporting that ChatGPT's parent company, OpenAI, is finalizing a $40 billion funding round that would be one of the biggest startup fundraises of all time. But there's a catch. The nonprofit company must successfully restructure itself into a for profit one. If it fails to do so, Lead Invest SoftBank can shrink the funding round size by half. Pressure has mounted for such a transition after Sam Altman was removed briefly as CEO in late 2023. At the time, OpenAI's board said Altman wasn't consistently honest in his communications. That led investors to argue that it was the nonprofit structure that carried too many risks. News Corp. Owner of the Wall Street Journal, has a content licensing partnership with OpenAI. Elsewhere, what was supposed to be the flashiest stock market debut of the year turned into a high profile stumble. Coreweave, which rents access to its stash of Nvidia servers, made its debut on the NASDAQ Stock Exchange today. It began trading about four hours after the broader market open and just under its IPO price of $40. Though it passed that threshold during the remainder of the session, it traded well below the $47 to $55 range the company targeted during its roadshow. For investors, the lackluster start for is a sign of cooling market demand for AI focused startups, and it illustrates the difficulty for companies hoping to make their way to the public markets this year. WSJ's Corey Driebush explains the worry for investors.

[C]

There are company specific issues and investors said, no, we don't really want to pay that much. And they also had concerns about the sustainability of the AI boom. And obviously companies right now are spending hundreds of billions of dollars on AI.

[B]

But how sustain Corweave shares ended Friday's trading session. Little changed. Finally, President Trump took the cap off his pardon pen today, this time for Trevor Milton, the founder of the now bankrupt electric truck maker Nikola. Milton was convicted of securities and wire fraud in 2022. Prosecutors portrayed him as a con man who pulled the wool over investors eyes by being untruthful about Nikola's sales and the real performance ability of its vehicles. Milton maintained his innocence and appealed his conviction. He was sent sentenced to four years in prison, but has been out on bond during the appeal. For a deeper dive into what's happening in tech, check out Monday's Tech News Briefing podcast.