OpenAI demands investors shun rivals such as Anthropic, Elon Musk’s xAI

OpenAI has raised $6.6 billion from investors like Thrive Capital and Tiger Global, but the AI company also sought assurances that investors would avoid funding five competing firms, according to a Reuters report.

The competitors include Anthropic, Elon Musk’s xAI, and Safe Superintelligence (SSI), a startup launched by OpenAI co-founder Ilya Sutskever.

These companies directly compete with OpenAI in advancing large language models, a capital-intensive effort.

Additionally, OpenAI named two AI application firms — AI search startup Perplexity and enterprise search company Glean.

On Wednesday, the San Francisco-based startup announced it completed its latest funding round, reaching a $157 billion valuation — the highest in Silicon Valley’s history.

This comes after the company revealed plans to shift from its nonprofit origins to a for-profit structure amid major leadership upheavals, including the sudden departure of several top executives.

“The new funding will allow us to double down on our leadership in frontier AI research, increase compute capacity, and continue building tools that help people solve hard problems,” OpenAI said in a statement.

The investors included chipmaker Nvidia and Microsoft. Apple, which had been in discussions to invest, ultimately chose not to participate, according to Reuters.

Impact of exclusivity deal

Exclusivity agreements, while not unheard of, are relatively rare in the tech industry, particularly within the AI venture capital space, according to Thomas George, president of Cybermedia Research.

“These arrangements have traditionally been more common in fast-moving, high-stakes industries like ridesharing, where firms like Uber and Lyft sought to secure conflict-free funding during critical growth periods,” George said. However, such agreements were typically limited to defined periods, such as six or 12 months, he added.

The move could significantly reshape the venture capital landscape, potentially intensifying competition for funding among emerging AI startups and concentrating most venture capital investments around fewer, larger companies.

“OpenAI’s move could stifle innovation in the short term,” said Nitish Mittal, partner at Everest Group. “With fewer resources available, competitors might struggle to keep pace with OpenAI’s advancements. By restricting capital flow to competitors, OpenAI could consolidate more market share and talent, thus slowing down the growth of rivals.”

However, this might also incite a counter-reaction, spurring these companies to seek alternative funding sources, forge new alliances, or innovate to reduce their reliance on heavy capital, according to George.

“While this could temporarily consolidate OpenAI’s position, it also risks creating a more aggressive competitive environment, where rivals may accelerate innovation to differentiate themselves,” George said.  

Possible expansion plans

These concerns become more pronounced when considering OpenAI’s plans, particularly its possible expansion of enterprise offerings.

The inclusion of AI application developers in its portfolio suggests this direction, as the company projects revenue to rise to $11.6 billion by 2025, up from $3.7 billion this year.

“To capture deeper financial engagement, OpenAI aims to accelerate the development and rollout of enterprise-grade AI systems and large language models, making it more competitive,” George said. “This strategy appears to support OpenAI in expanding its business operations and achieving high revenue expectations sooner than anticipated.”

However, there is also the possibility of heightened regulatory scrutiny. “If successful, this strategy could boost OpenAI’s market position, but it may also provoke regulatory scrutiny or push rival firms to innovate faster through alternative funding channels,” Mittal said.