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Sam Altman, the chief executive of OpenAI, says that technological revolutions are driven by more than just technology. They are also driven, he argues, by new ways of paying for them.
“There is always a lot of focus on technological innovation. What really drives a lot of progress is when people also figure out how to innovate on the financial model,” he recently said at the site of a data center that OpenAI is building in Abilene, Texas.
Over the last several years, Mr. Altman’s company has found unusual and creative ways of paying for the computing power needed to fuel its ambitions.
Many of the deals OpenAI has struck — with chipmakers, cloud computing companies and others — are strangely circular. OpenAI receives billions from tech companies before sending those billions back to the same companies to pay for computing power and other services.
Industry experts and financial analysts have welcomed the start-up’s creativity. But these unorthodox arrangements have also fueled concerns that OpenAI is helping to inflate a potential financial bubble as it builds what is still a highly speculative technology.
Here are unusual financial agreements helping to drive the ambitions of OpenAI, the poster child of the artificial intelligence revolution.
From 2019 through 2023, Microsoft was OpenAI’s primary investor. The tech giant pumped more than $13 billion into the start-up. Then OpenAI funneled most of those billions back into Microsoft, buying cloud computing power needed to fuel the development of new A.I. technologies.
(The New York Times has sued OpenAI and Microsoft, claiming copyright infringement of news content related to A.I. systems. The two companies have denied the suit’s claims.)
By the summer of last year, OpenAI could not get all the computing power it wanted from Microsoft. So it started signing cloud computing contracts with other companies, including Oracle and little-known start-ups with names like CoreWeave.
Across three different deals signed this year, OpenAI agreed to pay CoreWeave, a company that builds A.I. data centers, more than $22 billion for computing power. As part of these agreements, OpenAI received $350 million in CoreWeave stock, which could ultimately help pay for this computing power.
OpenAI also struggled to get the additional investment dollars it wanted from Microsoft. So, it turned to other investors. Earlier this year, the Japanese conglomerate SoftBank led a $40 billion investment in OpenAI.
At the same time, OpenAI has been working with various companies to build its own computing data centers, rather than rely on cloud computing deals. This also includes SoftBank, which is known for highly speculative technological bets that don’t always pay off. The company is raising $100 billion to help OpenAI build data centers in Texas and Ohio.
Similarly, Oracle, a software and cloud computing giant, has agreed to spend $300 billion building new data centers for OpenAI in Texas, New Mexico, Michigan and Wisconsin. OpenAI will then pay Oracle roughly the same amount to use these computing facilities over the next several years.
The United Arab Emirates was part of an OpenAI’s fund-raising round in October 2024. Now, G42, a firm with close ties to the Emirati government, is building a roughly $20 billion data center complex for OpenAI in the Emirates.
Last month, Nvidia announced that it intended to invest $100 billion in OpenAI over the next several years. This could help OpenAI pay for its new data centers. As OpenAI buys or leases specialized chips from Nvidia, Nvidia will pump billions back into OpenAI.
Two weeks later, OpenAI signed an agreement with AMD that allows OpenAI to buy up to 160 million shares in the chipmaker at a penny per share. That translates to roughly a 10 percent stake in the company. This stock could supply OpenAI with additional capital as it works to build new data centers.
OpenAI pulls in billions of dollars in revenue each year from customers who pay for ChatGPT, computer programming tools and other technologies. But it still loses more money than it makes, according to a person familiar with the company’s finances.
If the company can use its new data centers to significantly improve A.I. technologies and expand its revenue over the next several years, it can become a viable business, as Mr. Altman believes it will. If technology progress stalls, OpenAI – and its many partners – could lose enormous amounts of money. Smaller companies like CoreWeave, which are taking on enormous amounts of debt to build new data centers, could go bankrupt.
In some cases, companies are hedging their bets. Nvidia and AMD, for instance, have the option of reducing the cash and stock they send to OpenAI if the A.I. market does not expand as quickly as expected. But others would be left with enormous debt, which could send ripples across the larger economy.
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