OpenAI has signed roughly $1 trillion worth of deals for computing power — contracts far beyond its current ability to finance.
"OpenAI is in no position to make any of these commitments," said Gil Luria, an analyst at DA Davidson, in an interview with the Financial Times. The company could lose about $10 billion this year. Agreements with Nvidia, AMD, Oracle, and CoreWeave would give OpenAI access to more than 20 gigawatts of computing capacity — about the output of 20 nuclear reactors. OpenAI executives estimate that each gigawatt of AI computing capacity costs around $50 billion, putting the total bill close to $1 trillion.
CEO Sam Altman said on Monday that becoming profitable was "not in my top-10 concerns." The arrangements involve circular financing structures: Nvidia plans to invest $100 billion in OpenAI — funds that OpenAI can then use to purchase Nvidia chips. AMD will give OpenAI warrants allowing it to buy up to 10 percent of AMD’s shares for just one cent per share.
The deals have already boosted partner stock prices: Oracle’s market value jumped by $244 billion after the announcement, and AMD rose nearly 24 percent on Monday.
"Born without cost discipline"
A Silicon Valley investor told the Financial Times, "The company is in a far more capital-intensive business than Google or Microsoft ever was, and was born with no cost discipline."
Amazon founder Jeff Bezos and Oracle founder Larry Ellison, the investor added, only "found religion" and slashed costs "after nearly going bankrupt."
OpenAI has raised about $47 billion in venture capital so far and is preparing to take on tens of billions of dollars in debt. For now, OpenAI generates about $12 billion in annual revenue — only a fraction of the commitments it has made. Its partners and investors are betting that the company will vastly expand its user base and successfully monetize new products.
