SoftBank’s Vision Fund has invested $500 million in OpenAI, but the Japanese conglomerate’s CFO Navneet Govil reveals they deliberately passed on an earlier opportunity in 2023 when the AI company was valued at just $30 billion—a fraction of its current $157 billion valuation. In an exclusive interview with Business Insider, Govil explained that the timing simply wasn’t right for SoftBank’s investment strategy.
The investment came as part of OpenAI’s massive $6.6 billion funding round announced last month, which included participation from Microsoft, Tiger Global, and other major investors. This round valued the ChatGPT creator at $157 billion, making it one of the most valuable private companies globally, surpassed only by giants like SpaceX and ByteDance.
Govil emphasized that SoftBank positions itself as “growth equity investors with a focus on mid-to-late-stage companies.” In 2023, OpenAI was still operating largely as a not-for-profit entity, exploring various revenue streams. The situation has transformed dramatically since then. OpenAI’s revenue is projected to reach $3.7 billion this year, up from approximately $20 million just two years ago—a staggering growth trajectory fueled by ChatGPT’s global adoption.
ChatGPT now boasts 350 million monthly active users, according to Govil, outpacing rival AI platforms. The company has also secured strategic partnerships, including a high-profile collaboration with Apple to integrate ChatGPT into iPhone devices. “When you look at where OpenAI is today, it’s more mature, has a stronger revenue base, and a clear focus of converting to a for-profit entity,” Govil explained.
The investment aligns perfectly with SoftBank CEO Masayoshi Son’s AI obsession. Son has long dreamed of achieving “artificial superintelligence,” met with OpenAI CEO Sam Altman last year, and is reportedly a habitual ChatGPT user. After suffering heavy losses on previous tech bets like WeWork, SoftBank has rebounded with a $7.7 billion profit in its latest quarter.
However, challenges remain. The capital expenditure required for developing large language models is astronomical, with Anthropic CEO Dario Amodei predicting AI training runs could eventually cost $100 billion. Govil acknowledged the significant capex but pointed to OpenAI’s Microsoft partnership and Azure cloud access as crucial cost management tools. He also sees monetization opportunities through increased ChatGPT subscriptions, the GPT Store, and expanded API adoption.
Key Quotes
We could have done it in 2023 at a much lower valuation, $30 billion
SoftBank Vision Fund CFO Navneet Govil explained why the firm passed on an earlier OpenAI investment opportunity. This reveals the strategic patience of major investors waiting for AI companies to demonstrate clear business models before committing capital, even if it means paying significantly higher valuations.
When you look at where OpenAI is today, it’s more mature, has a stronger revenue base, and a clear focus of converting to a for-profit entity
Govil justified SoftBank’s timing decision by highlighting OpenAI’s transformation from a largely not-for-profit research organization to a revenue-generating business. This statement underscores the critical importance of proven business models in attracting late-stage institutional investment in AI.
Our view is if it’s a disruptive company and the addressable market is large, there’s room for more than one player
Govil addressed reports that OpenAI requested investors not back rival companies, suggesting SoftBank maintains flexibility to invest across the AI landscape. This indicates major investors see the AI market as large enough to support multiple winners rather than a winner-take-all scenario.
Our Take
SoftBank’s investment strategy reveals a sophisticated understanding of AI market dynamics. By waiting until OpenAI demonstrated explosive revenue growth and clear monetization paths, they’ve de-risked their position despite paying a premium valuation. The $3.7 billion revenue projection validates that generative AI has moved beyond hype into genuine commercial adoption. However, the astronomical capital requirements Govil acknowledges—potentially $100 billion for training runs—suggest we’re entering an era where only the most well-capitalized AI companies can compete at the frontier. This could create an oligopolistic market structure reminiscent of cloud computing, where a few dominant players control critical infrastructure. The tension between OpenAI’s reported request for exclusivity and SoftBank’s multi-player philosophy will be fascinating to watch, as it may determine whether the AI industry consolidates or remains competitive.
Why This Matters
This investment represents a pivotal moment in AI’s maturation as an industry. SoftBank’s strategic decision to wait until OpenAI demonstrated clear revenue generation and business model viability signals that AI companies are transitioning from speculative ventures to established businesses with proven monetization paths. The $157 billion valuation underscores the market’s confidence in generative AI’s transformative potential across industries.
The story highlights the massive capital requirements driving AI development, with training costs potentially reaching $100 billion. This creates significant barriers to entry, potentially consolidating the industry around well-funded players like OpenAI, Anthropic, and Google. For businesses, this suggests AI capabilities will increasingly come from a handful of dominant platforms rather than numerous startups.
The investment also reflects growing institutional confidence in AI’s commercial viability despite ongoing challenges like executive departures and questions about model performance improvements. SoftBank’s willingness to invest at a premium valuation, combined with OpenAI’s explosive revenue growth from $20 million to $3.7 billion in two years, demonstrates that enterprise and consumer AI adoption is accelerating faster than many predicted, fundamentally reshaping how technology investment decisions are made.
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Source: https://www.businessinsider.com/softbank-openai-investment-explained-vision-fund-cfo-2024-11