OpenAI is burning cash at a scale that would make the dot-com bubble blush.
The startup has committed to $328 billion in spending — $300 billion to Oracle for compute, $18 billion for a data-center venture, and $10 billion for Broadcom chips — while pulling in just $13 billion a year.
The Oracle deal alone averages $60 billion annually over five years, more than four times OpenAI’s current top line. Losses already run into the billions each year, and chief executive Sam Altman has told investors they will stack to $44 billion by 2029, the first year OpenAI is projected to turn a profit.
At the same time, OpenAI is selling Wall Street a vision of runaway growth: $100 billion in revenue by 2028, $200 billion by 2030. That requires annual sales to expand nearly eightfold in three years and fifteenfold in five.
Meanwhile, investors have pledged $50 billion in the past year and backed a restructuring plan that would free up another $19 billion in conditional funding.
The spree has already inflated Oracle and Broadcom’s market values by more than $400 billion, pushing Oracle Chairman Larry Ellison within reach of becoming the world’s richest man.
Despite OpenAI’s massive spending, a study shows that about 3% of consumers pay for AI services, and surveys suggest most corporations have yet to see a significant bottom-line impact.
Last month, Altman himself told The Verge that the AI frenzy is comparable to the dot-com bubble witnessed in the 1990s. He warned that the artificial intelligence boom would wipe out fortunes, but highlights that those who survive will make a “phenomenal” amount of money.
“You should expect OpenAI to spend trillions of dollars on data center construction in the not very distant future. You should expect a bunch of economists to wring their hands.”