OpenAI has lined up more than $1 trillion in spending – and now it's trying to figure out how to pay for it all.
Over the last few weeks, the AI leader has signed a $300 billion contract with Oracle as well as multi-billion dollar deals with Nvidia, AMD, and Broadcom.
Reports of this huge spending spree have echoed across the AI industry, fueling concerns that the bubble is about to burst. If bullish AI companies can't pay their bills, infrastructure providers could find themselves out of pocket.
And no wonder there are concerns. Though these deals are staggered over several years, OpenAI last year posted revenue of about $10 billion.
While that's expected to double this year, that's still a far cry from being able to cover such bills – and don't forget that this time last year OpenAI was scrounging up $6 billion from investors to stay in business.
How is OpenAI paying for this?
OpenAI has plans to pay for it all, according to reports from the Financial Times, which note that about 70% of OpenAI's $13 billion in annual recurring revenue comes from consumer versions of ChatGPT.
Indeed, in January CEO Sam Altman said the tech giant was "currently losing money on OpenAI Pro subscriptions" because people used them so heavily.
Given that, the first goal is to double the number of paying subscribers from just 5% of the total 800m or so globally, perhaps by offering cheaper access in more places beyond India.
Another revenue boost is the addition of a checkout in ChatGPT, letting OpenAI take a slice of purchases. Advertisement revenue is another consideration, though CEO Sam Altman has said OpenAI would only do ads "with great caution".
Beyond leveraging ChatGPT's popularity with consumers, the FT reported that OpenAI plans to make use of its expertise to help develop AI infrastructure improvements, something that could prove popular with the companies it's signed all those deals with.
The tech company is also working with ex-Apple designer Jony Ive on an AI-powered personal assistant device.
Beyond those ideas, OpenAI is hoping it can continue to raise funds from investors – and believes expensive compute costs will fall thanks to competition in the sector.
Circular deals
Another solution is to be found in the deals themselves. The partnerships with Nvidia and AMD have been both described as “circular”. For example, Nvidia is investing $100 billion in the company to let it buy Nvidia’s highly sought-after chips.
Meanwhile, AMD has offered up 160 million shares for a penny apiece to help fund its shopping spree.
The FT cited an unnamed source who had advised the company, who suggested the current deal setup with a host of industry stakeholders makes perfect sense given the bold ambitions the company has.
"I don’t view them as drunken sailors going to bars and laying down IOUs everywhere,” they told the publication.
“It might look and feel that way, but this is actually a strategy backed up by technology, products, business plans and visibility into what is happening."
A complete account of OpenAI deals
All told, the FT estimates OpenAI has signed on for more than 26 gigawatts of computing capacity at a cost of more than $1 trillion. However, that covers the next several years of deployments and many of the plans are tiered, so they can be clawed back or ditched if not needed.
Last week, OpenAI and Broadcom announced they were working on 10 gigawatts of compute together; though financial details weren't disclosed, CNBC estimated that each 1 gigawatt costs a whopping $50 billion at the moment.
Elsewhere, OpenAI confirmed a $300 billion deal with Oracle over the next five years as part of the $500 billion infrastructure project known as Stargate.
Alongside that, Nvidia and OpenAI announced a partnership that could see the chipmaker invest as much as $100 billion into the AI company, which will buy hardware from Nvidia to build up to 10 gigawatts of compute.
Shortly after, OpenAI and AMD announced a deal worth as much as $100 billion over several years, that could see OpenAI take a 10% stake in AMD as it deploys 6 gigawatts of the chipmaker's GPUs.
Earlier this year, OpenAI signed a five-year, $12 billion deal with CoreWeave for infrastructure as it started to step away from Microsoft. OpenAI even tried to buy AI coding startup Windsurf for $3 billion, but lost out to Cognition instead.
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