OpenAI’s journey stands as Silicon Valley’s boldest experiment yet. The ChatGPT creator plans to burn through $115 billion by 2029, a figure no company has ever intentionally targeted. For context, Uber, Tesla, Snap, and Netflix combined torched just $42 billion during their most extravagant years.
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The typical Silicon Valley playbook is straightforward: secure initial funding, launch a product, attract billions for growth, acquisitions, tech, and talent, then scale prices for profit - think Amazon, Facebook, or Uber. OpenAI, however, defies this mold with its staggering ambition.
The spotlight recently fell on a $300 billion, five-year deal with Oracle, starting in 2027, under the Stargate project.
This agreement provides OpenAI with computational power and infrastructure - resources it lacks the cash to fund. With annual revenues of $10 –13 billion, OpenAI faces deficits in the near term, aiming for a break-even scale that aligns expenses and income.
Compare this to Alibaba’s record-breaking 2014 IPO, which raised $25 billion - barely enough for one year of OpenAI’s peak spending. Raising such sums privately seems daunting, especially with its nonprofit structure. Yet, progress is afoot: a memorandum with Microsoft could reshape OpenAI into an investor-friendly entity. So far, it has raised $64 billion historically, with $40 billion this year alone, valuing it at $300 billion. To hit its spending goal, another $50–75 billion is needed, excluding future contract liabilities.
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Additionally, OpenAI is negotiating to sell $6 billion in employee shares, potentially pushing its valuation to $500 billion - the highest for any private tech firm. Curiously, an IPO isn’t a priority, suggesting private funding might sustain this juggernaut.
This raises a provocative question: if private capital can fuel such ventures, is the stock market now more about trading risks and setting prices than raising capital?
The paradox deepens: amid AI’s current frenzy, OpenAI might still secure these funds. Even with a $500 billion valuation and signs of cooling AI interest, the world’s obsession with artificial intelligence ensures investors won’t sit out this race.
Author: Slava Vasipenok
Founder and CEO of QUASA (quasa.io) - Daily insights on Web3, AI, Crypto, and Freelance. Stay updated on finance, technology trends, and creator tools - with sources and real value.
Innovative entrepreneur with over 20 years of experience in IT, fintech, and blockchain. Specializes in decentralized solutions for freelancing, helping to overcome the barriers of traditional finance, especially in developing regions.
This is not financial or investment advice. Always do your own research (DYOR).
