OpenAI’s Financial Situation Will Cause a Nauseating Sensation in the Pit of Your Stomach

OpenAI doesn’t just consume money. It sets a whole mountain of money on fire.

But since it is not a publicly traded company, it remains difficult to gauge the extent of this mountain. But clues appear periodically: e.g Financial Times For example, the company recently signed a staggering $250 billion leasing agreement with Microsoft — as well as a $38 billion contract with Amazon, less than a week later.

According to HSBC, whose software and services team released an update to its financial model for OpenAI, the company will spend a whopping $620 billion Every year About leasing data center capacity to run its own AI models alone. This is despite the fact that only a third of the total contracted quantity of 36 GW is scheduled to be commissioned before 2030.

It’s a perilous moment, with lenders anticipating massive revenue growth — a massive demand that will require OpenAI to accomplish things unprecedented in business history.

Meanwhile, experts are warning of an AI bubble that has grown so large that it is propping up the entire US economy. If it explodes, the consequences could be catastrophic, with the discussion shifting toward whether companies can survive the next two years as spending on data centers continues to rise sharply.

This is not the only challenge on the horizon. OpenAI also has to face increasing competition as well, with Google’s Gemini 3 throwing down the gauntlet earlier this month. Incidentally, this is more dismissive than HSBC, which expects OpenAI’s consumer market share to decline significantly by the end of the decade.

Whether OpenAI will be able to pay its bills in the coming years remains ambiguous at best. According to HSBC, the company will need to reach three billion ChatGPT users by 2030, which is a big goal considering that user base growth has already plateaued. According to CEO Sam Altman, the company has about 800 million weekly active users.

as foot It was reported last month that ChatGPT subscribers account for nearly 70 percent of the company’s annual recurring revenue — yet only 5 percent of users are currently willing to pay for a subscription.

The new revenue will also have to be pumped into building more data centers to support new users, e.g foot Explains, in A vicious cycle that could significantly eat into OpenAI’s margins.

If all goes well, HSBC suggests OpenAI will eventually change its data center commitments.

“Less capacity will always be better than a liquidity crunch,” the broker wrote.

While HSBC remained optimistic about the prospect of massive “productivity-driven” economic growth that could “dwarf what is often seen as unreasonable.” [capital expenditure] Spending Nowadays, “OpenAI still has to pull it off.

Investors are already asking some tough questions about AI companies’ high valuations and meager revenues, with shares of AI chip maker Nvidia falling for several weeks now — despite reporting better-than-expected quarterly earnings.

And Nvidia is the company selling shovels during the ongoing AI gold rush. OpenAI has a much steeper hill to climb, having to create a profitable service while paying for all those shovels.

In a key moment earlier this month, Altman became angry after Brad Gerstner, a podcast host and OpenAI investor, asked him how a company with “$13 billion in revenue” could “make $1.4 trillion in spending commitments.”

“If you want to sell your shares, I will find you a buyer,” Altman responded. “enough.”

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