On Monday the outfit inked a deal with AMD which follows earlier tie-ups with Nvidia, Oracle and CoreWeave, as Sam Altman’s outfit scrambles to secure enough silicon to keep ChatGPT online and the hype machine alive.
The latest commitments would give OpenAI access to more than 20 gigawatts of computing capacity over the next decade, roughly the output of 20 nuclear reactors. At about $50 billion per gigawatt, according to OpenAI’s estimates, the total tab hits that $1 trillion figure.
Analysts are not convinced this financial engineering makes any sense. DA Davidson analyst Gil Luria said: “OpenAI is in no position to make any of these commitments,” adding that it could lose about $10 billion this year.
Luria suggested the whole thing reeks of Silicon Valley’s “fake it until you make it ethos, only now a lot of big companies have a lot of skin in the game on OpenAI.”
The ChatGPT maker’s spending spree ties some of the world’s biggest tech names to its uncertain fate. Nvidia and AMD’s combined deals could reach $800 billion, while Oracle’s pact adds another $300 billion.
CoreWeave, a lesser-known data-centre outfit, disclosed more than $22 billion in contracts with OpenAI. The result is a tangled web of circular financing, where everyone is simultaneously a customer, supplier and investor in everyone else.
AMD’s chief executive Lisa Su tried to put a positive spin on it, describing the structure as “pretty innovative,” though one suspects accountants will find it more creative than comforting.
AMD has effectively handed OpenAI warrants to buy up to 10 per cent of the company for a cent a share if certain milestones are met, a ludicrously generous deal considering AMD shares closed at nearly $204 on Monday.
Meanwhile, Nvidia has promised to pump $100 billion into OpenAI over the next decade, a move that will conveniently help OpenAI pay for Nvidia’s own chips.
Oracle’s stock leapt by $244 billion in value after its deal went public, while AMD shares shot up 24 per cent, adding another $63 billion to its market cap. Clearly, the cocaine nose jobs of Wall Street like what they see, at least for now.
The structure looks more like a financial merry-go-round than a business plan. OpenAI has burned through billions on hardware, data centres and talent, yet Altman himself admitted that becoming profitable was “not in my top-10 concerns.”
The company has already raised $47 billion in venture funding and $4 billion in bank debt, and now plans to take on tens of billions more to keep the lights on.
The credit agencies are less amused. Moody’s has already warned that Oracle’s dependence on OpenAI for its future data-centre revenue looks risky, given OpenAI’s “unproven path to profitability.” With Nvidia worth more than $4 trillion and flinging cash at its customers, investors seem happy to pretend that infinite GPUs equal infinite growth.
