OpenAI’s IPO Is On The Ropes After Massive Multi-State AI Probe

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By: Oliver Hawthorne

OpenAI’s confidential IPO filing hit a major snag. Multiple US state attorneys general just launched a formal investigation. Regulators aren’t looking at small compliance issues. They’re digging into core AI safety and user data practices. The timing couldn’t be worse for OpenAI and its backers. The entire AI industry is watching how this plays out. Any negative outcome will shift investor sentiment overnight.

The subpoena was led by New York Attorney General Letitia James. It asks for documents on advertising, data handling, and AI behavior. It also covers activities involving minors and seniors, plus internal policies. Florida already sued OpenAI and CEO Sam Altman. It claims the company knowingly released an unsafe product. Florida also opened a criminal probe into ChatGPT’s link to a Florida State University mass shooting. This isn’t isolated to OpenAI. Back in December, 42 attorneys general sent warning letters to five top AI firms. California opened a separate probe into xAI’s Grok chatbot over harmful explicit content.

OpenAI’s generic statement promises constructive engagement with regulators. That does nothing to ease investor fears. The OpenAI IPO valuation relies on a narrative of unregulated, fast growth. Regulators are now proving AI growth will carry heavy compliance costs. Most smaller AI startups can’t absorb those costs. Even large players like OpenAI will see long-term margin pressure. This probe will either delay the IPO or cut its expected valuation sharply.

Author bio: Oliver Hawthorne, Principal Correspondent at an international tech review covering AI regulation and venture capital.