OpenAI employees shell out $6.6bn as 600 employees become millionaires in tenders

About 600 employees at OpenAI walked away with an estimated 11 million rand ($8 million) each after issuing a combined $6.6 billion ($4.8 billion) in shares, in one of the largest employee wealth transfers Silicon Valley has produced.

The second share sale, first reported by the Wall Street Journal, allowed the first employees of ChatGPT developer to sell stock to incoming investors rather than waiting for an initial public offering. 75 of the lucky group sold the maximum amount allowed by the company and walked away with $ 30 million each.

It's a stark illustration of the accumulation of wealth generated by artificial intelligence and a stark reminder, to British SME founders watching from the sidelines, of the scale at which the US technology sector now operates. A single payment exceeds the entire annual research and development budget of many FTSE 250 companies.

OpenAI requires employees to hold their shares for two years before they can be sold, meaning last year's deal was the first significant opportunity for early adopters to see their benefits since ChatGPT was released to the public in November 2022. The rapid global success of the product has driven the highest private equity valuation in the company's history.

The lab founded by Sam Altman and his co-founders was valued at $1 billion in 2019, when it launched a for-profit company alongside its non-profit parent. By 2023, after Microsoft's historic investment shortly after the launch of ChatGPT, the value had reached $29 billion. A second October sale that brought last year's payouts valued the company at $500 billion, and another $122 billion fundraising round completed in March brought the total down to $852 billion.

An initial public offering, expected in early 2027, could value OpenAI at more than $1 trillion and turn dozens of its early employees into multimillionaires. Elon Musk's SpaceX, which now houses his xAI laboratory, and Anthropic, the developer of the Claude chatbot, are both reportedly eyeing a public market sale for similar amounts.

OpenAI's pay scale has been recognized in the broader technology labor market. Meta, the owner of Facebook and Instagram, has reportedly offered individual compensation packages worth more than $300 million in an effort to lure top AI researchers to their rivals. The resulting war for talent has pushed machine learning engineers' salaries into seven figures and made it harder for European startups, including British ones, to retain homegrown talent.

The work was completed as concerns about the AI ​​bubble reached a recent high. Technology stocks sold off sharply between September and October of last year among investors worried about the circular financing arrangements between AI laboratories, incubators and cloud providers, despite the large irrigation costs made by the major players. That OpenAI was able to clear a $6.6 billion second round of its $500 billion valuation amid that turmoil underscores the strength of demand from sovereign wealth funds and private equity investors to acquire the sector.

The payments also coincide with an escalating legal dispute between the company and Mr. Musk, an early supporter who sued OpenAI for its conversion from a charity to a for-profit business. The case, which has been in court for the past two days, has produced one of the most eye-popping revelations: Greg Brockman, the president of OpenAI, revealed that his stake in the business is worth about $30 billion. OpenAI dismissed the lawsuit as motivated by jealousy and did not respond to a request for comment on the stock sale.

For Britain's growth-stage business founders, OpenAI's numbers serve as both an inspiration and a warning. They show the extraordinary amount of secondary markets that can be opened for workers without the need to be listed, a route that is very popular in Silicon Valley as companies remain secretive for a long time. They also emphasize the talent and financial crunch facing any UK company hoping to compete with American hyperscalers, where stock-based compensation alone can exceed the lifetime salary of an entire British R&D team.

Whether the AI ​​boom proves to be a technological revolution or a repeat of the rich value of the dotcom era, the experiment has already been cleared.