Is OpenAI building its future on debt? Study reveals partners are burdened with $96 billion in loans
Companies that have tapped OpenAI to provide data centers, chips and “computing” processing power have borrowed nearly $96 billion to fund their operations, according to a recent analysis by The Financial Times.
According to the report, companies such as SoftBank, Oracle and CoreWeave borrowed at least $30 billion to invest in the loss-making startup; because the company is benefiting from a debt-fueled spending spree without having to make any financial outlays itself.
This underscores the AI industry’s dependence on debt and increasing dependence on a particular company for future earnings.
Currently, revenues generated by AI companies and the rapidly expanding data center operators to serve them are not sufficient to cover construction costs.
“It was some kind of strategy. How does it happen?” [OpenAI] According to the FT, a senior OpenAI executive is taking advantage of others’ balance sheets.
OpenAI is already under scrutiny for its $1.4 trillion commitments to procure energy and computing power for its future operations over the next eight years. The amount of loans, which is expected to reach $100 billion soon, will also increase scrutiny.
The commitments exceed OpenAI’s estimated $20 billion in annual revenue this year.
How much credit have OpenAI partners received so far?
Here’s a breakdown of the amount of credit OpenAI partners have received so far, according to FT:
- SoftBank, Oracle and CoreWeave have already borrowed a combined $30 billion for OpenAI.
- About $28 billion in loans were received from Blue Owl Capital and Crusoe.
- Meanwhile, Oracle, Vantage and their banks are in talks to borrow another $38 billion to finance OpenAI operations.
Thus, the total amount of debt taken by these companies jointly decreases to approximately 96 billion dollars. Meanwhile, according to information the FT quotes knowledgeable people, OpenAI has very little debt on its balance sheet. The startup has a $4 billion credit facility with several U.S. banks that it secured last year but has not yet used.
The increased use of debt is a relatively new development in the world of artificial intelligence. Previously, most AI development was funded by cash from big tech companies like Microsoft, Alphabet, Amazon, and Meta.
“The most important thing we can do to meet growing global demand is to build AI infrastructure. . . . the current computing shortage is the biggest constraint on OpenAI’s ability to grow,” OpenAI said.
