Microsoft (MSFT)-backed OpenAI has secured a $4 billion revolving line of credit, boosting its total liquidity to over $10 billion, the AI company stated in a blog post. This development follows Wednesday’s news that OpenAI closed its latest funding round at a valuation of $157 billion, which included $6.6 billion raised from various investment firms and major tech companies.
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Major Financial Insitutions Offer OpenAI Credit
Notably, financial institutions like JPMorgan Chase (JPM), Citi (C), and Goldman Sachs (GS), along with other major banks, have all participated in this credit arrangement. Specifically, the base credit line is set at $4 billion, with an option to increase it by an additional $2 billion if needed. Furthermore, the loan is unsecured and can be accessed over a period of three years. To clarify the terms, OpenAI’s interest rate is pegged to the Secured Overnight Financing Rate (SOFR) plus 100 basis points. For context, the Secured Overnight Financing Rate (SOFR) serves as a benchmark rate that measures the cost of overnight borrowing using Treasury securities as collateral.
New Credit Facility Will Give OpenAI Access to More Liquidity
OpenAI explained in its blog post, “This means we now have access to over $10 billion in liquidity, which gives us the flexibility to invest in new initiatives and operate with full agility as we scale.” In addition, the company noted that the funds would be used to invest in research and product development, expand infrastructure, and attract top talent.
Is Microsoft a Buy or Sell?
Turning to Wall Street, analysts have a Strong Buy consensus rating on MSFT stock based on 28 Buys and two Hold recommendations assigned in the past three months, as indicated by the graphic below. After a more than 30% rally in its share price over the past year, the average MSFT price target of $502.12 per share implies a 20.5% upside potential.
