As OpenAI faces scrutiny for its $1.4 trillion compute budget, the company’s complex financial arrangements and recent PR missteps are drawing uncomfortable attention. The core problem is a balance sheet that seems unbalanced: a loss-making startup is committing to spending far beyond its $13-$20 billion in annual revenue, forcing it to find creative and, some say, questionable ways to foot the bill.
The most recent controversy erupted when CFO Sarah Friar suggested government guarantees could “drop the cost of financing” for its massive chip expenditures. The comment was immediately interpreted as OpenAI, a $500bn for-profit entity, asking for a taxpayer-funded backstop, similar to the banks in the late 2000s. The company quickly walked back the statement, with Sam Altman insisting he does not “want government guarantees.”
This incident, however, draws attention to the other complex deals OpenAI is striking. Questions are being raised about the “circular nature” of some of its financing. For instance, Oracle is set to spend $300 billion on new datacenters for OpenAI, and OpenAI will then pay roughly the same amount back to Oracle to use them. Another transaction involves OpenAI paying Nvidia cash for chips, while Nvidia, in turn, invests in OpenAI for non-controlling shares.
These arrangements paint a picture of a company scrambling to secure the massive infrastructure it needs to compete with self-funded giants like Google and Meta. Analyst Benedict Evans describes OpenAI as “trying to bootstrap its way into the club” of Big Tech, a club whose members can pay for their AI ambitions with massive cash flows from existing businesses.
While Altman projects confidence, pointing to $20 billion in upcoming revenue, the company admits it is still loss-making. It has denied specific figures, such as a reported $12 billion loss in the third quarter, but has not provided its own numbers. This lack of transparency, combined with the “bailout” talk and circular deals, raises serious questions about the long-term sustainability of its $1.4 trillion plan.