OpenAI hits USD 500 bn valuation as staff share sale fuels chipmaker rally

OpenAI has become the world’s most valuable startup after a secondary share sale valued the company at USD 500 bn, overtaking Elon Musk’s SpaceX at USD 400 bn. The company was last valued at USD 300 bn in March, when SoftBank led a USD 40 bn round that included Abu Dhabi’s MGX.

The details: The latest transaction allowed staff and former employees to sell USD 6.6 bn worth of shares to investors including Thrive Capital, SoftBank, Dragoneer, MGX, and T. Rowe Price, the Financial Times quotes a source familiar with the matter as saying. The sale was heavily oversubscribed, with demand exceeding USD 10 bn. OpenAI had cleared up to USD 10 bn in stock for resale, but many employees opted to hold — a move insiders said reflected confidence in the company’s outlook.

The share sale highlights frenzied demand for AI, with investors speculating whoever comes out as the leader for the sector could eventually be worth USD tns. That optimism has been bolstered by Nvidia’s pledge last month to invest up to USD 100 bn in OpenAI to expand computing capacity.

Markets responded with a global rally: Chipmakers and tech indices added more than USD 200 bn in value in a single session, Bloomberg reports. South Korea’s SK Hynix jumped 10%, Samsung rose 3.5%, and the Kospi hit a record high. Taiwan’s TSMC and Hon Hai also climbed, as OpenAI entered into an agreement with South Korea’s SK Group and Samsung for the supply of chips for its Stargate initiative with Oracle and SoftBank.

Valuations are now stretched: The Philadelphia Semiconductor Index now trades at 27x forward earnings, close to last year’s peak, while Bloomberg’s Asia chip gauge stands at 19x. The Hang Seng Tech Index is up 50% YTD, also boosted by state support and corporate AI investment in China.

Analysts say the rally reflects fear of missing out. “Tech momentum shows no sign of fading [...] with headwinds brushed aside and every AI headline sparking bursts of euphoria,” Hebe Chen at Vantage Markets said. “Bubble talk lingers, but it’s FOMO that’s clearly running the show.”

Still, some warn valuations are running ahead of fundamentals, and any earnings stumble among mega-cap techs could trigger another sharp selloff, echoing April’s meltdown, JPMorgan Asset Management cautioned. “[Upcoming] fourth quarter earnings may force the reality check,” Chen added.

Not a problem for OpenAI? The company expects annual recurring revenue to hit USD 20 bn by year-end, up from USD 12 bn currently, FT reports, citing a person with knowledge of its finances.

THE CLOSING BELL: TADAWUL-

The TASI fell 0.3% on Thursday on turnover of SAR 6.5 bn. The index is down 4.5% YTD.

In the green: Sport Clubs (+5.2%), Almoosa (+4.4%) and Sisco Holding (+4.3%).

In the red: Bupa Arabia (-4.4%), Gaco (-3.2%) and Walaa (-2.9%).

THE CLOSING BELL: NOMU-

The NomuC fell 1.1% on Thursday on turnover of SAR 56.1 mn. The index is down 19.6% YTD.

In the green: Apico (+19.9%), Almohafaza For Education (+10.0%) and Fesh Fash (+7.8%).

In the red: Balady (-7.6%), Pro Medex (-7.5%) and Dkhoun (-7.3%).

CORPORATE ACTIONS-

The Capital Market Authority (CMA) greenlit Tabuk Agricultural Development’s 52.9% capital reduction to SAR 184.4 mn, it said in a disclosure to Tadawul. The SAR 207.4 mn capital decrease will see the firm cancelling some 20.7 mn share to extinguish the company’s accumulated losses. Tabuk Agricultural Development’s shareholders still need to vote on the move.

ALSO- The CMA gave the all-clear for Red Sea International Company to boost its capital via debt conversion, it said in a disclosure to Tadawul. The capital increase would involve converting SAR 476 mn of debt owed to creditors into equity in the company. The move is pending shareholder approval.