*

Funding round to value OpenAI at $300 bln, including new

investment, say sources

*

DeepSeek has challenged expectations of AI costs with

cheap

model

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OpenAI funding depends on dropping control of company by

non-profit arm, say sources

(Updates with details of funding round in paragraph 4 and

context throughout)

By Krystal Hu, Anna Tong and Milana Vinn

Jan 30 (Reuters) - SoftBank Group is in talks

to lead a funding round of up to $40 billion in artificial

intelligence developer OpenAI at a valuation of $300 billion,

including the new funds, sources said, in what could be a record

single funding round for a private company.

The funding comes as Chinese startup DeepSeek has launched

an inexpensive AI model that has caught worldwide attention and

challenged expectations of what it costs to develop and deploy

AI.

Still, SoftBank has valued OpenAI, the maker of ChatGPT, at

$260 billion going into the funding round, up from $150 billion

a few months ago, the sources, who requested anonymity to

discuss private matters, told Reuters.

The funding is expected to come in the form of convertible

notes and, similar to OpenAI's last funding round, is

conditioned on OpenAI restructuring its business to remove

control of the company by its non-profit arm.

Leading the funding round in OpenAI would mean a bold bet

for SoftBank, the global tech investor and its CEO Masayoshi

Son, whose group has about $30 billion in cash to deploy,

according to filings.

OpenAI and SoftBank declined to comment. The Wall Street

Journal reported earlier on Thursday that OpenAI was in talks

with SoftBank for an investment round to raise nearly $40

billion that would value the AI startup at up to $340 billion.

SoftBank could invest $15 billion to $25 billion directly

into Microsoft ( MSFT )-backed OpenAI, some of which may be used

to pay for OpenAI's commitment to Stargate, one of the sources

added.

Stargate, a joint venture of Oracle, OpenAI and

SoftBank, plans to invest up to $500 billion to help the U.S.

stay ahead of China and other rivals in the global AI race.

SoftBank's investment would be on top of the $15 billion it

has already committed to Stargate, the person said, adding the

talks are at an early stage.

In earnings calls this week, the CEOs of Microsoft ( MSFT ) and Meta

Platforms ( META ) defended their massive AI spending, saying it

was crucial to staying competitive in the new field. Microsoft ( MSFT )

has earmarked $80 billion for AI in its current fiscal year,

while Meta has pledged as much as $65 billion.

DeepSeek has attracted attention in global AI circles after

writing in a paper last month that the training of its model

DeepSeek-V3 required less than $6 million worth of computing

power from Nvidia H800 chips.

DeepSeek has used a common technique called model

distillation to build on top of frontier AI models including

those from OpenAI, and raised concerns among investors on

whether labs such as OpenAI can maintain their edge to generate

revenue while facing competition from lower-cost rivals.

(Reporting by Krystal Hu, Anna Tong, Milana Vinn; Arsheeya

Bajwa in Bengaluru and Juby Babu in Mexico City; Editing Peter

Henderson; Bill Berkrot and Muralikumar Anantharaman)