It is the $1.4tn (£1.1tn) question. How can a loss-making startup such as OpenAI afford such a staggering spending commitment?
Answer that positively and it will go a long way to easing investor concerns over bubble warnings in the artificial intelligence boom, from lofty tech company valuations to a mooted $3tn global spend on datacentres.
The company behind ChatGPT needs a vast amount of computing power – or compute, in tech jargon – to train its models, produce their responses and build even more powerful systems in the future. The cost of its compute commitment – the AI infrastructure such as chips and servers that power its world famous chatbot – is $1.4tn over the next eight years, a figure that dwarfs its $13bn in annual revenues.
Over the past week this gap has appeared chasm-like, becoming a backdrop to market nerves over AI spending and statements by OpenAI executives that did little to answer concerns.
Sam Altman, the OpenAI chief executive, first attempted to deal with it in an awkward exchange with a leading investor in the company, Brad Gerstner of Altimeter Capital, that ended with Altman ordering: “enough”.
Speaking on his podcast with Altman last month, Gerstner described the company’s ability to pay for more than $1tn in compute costs, while revenue is running at $13bn a year, as a question “hanging over the market”.
Altman responded: “First of all, we’re doing well more revenue than that. Second of all, Brad if you want to sell your shares, I’ll find you a buyer. I just, enough.”
Then last week the OpenAI chief financial officer, Sarah Friar, suggested that the US government could underwrite some of the chip spending.
“This is where we’re looking for an ecosystem of banks, private equity, maybe even governmental, the ways governments can come to bear,” she told the Wall Street Journal, adding that such a guarantee “can really drop the cost of financing”.
Was OpenAI, which recently announced it is becoming a fully fledged for-profit company worth $500bn, really saying that AI companies should be treated like banks in the late 2000s? This triggered immediate attempts at clarification from Friar, who took to LinkedIn to deny that OpenAI was seeking a federal backstop, while Altman sought to set the record straight on X.
In a long post, Altman wrote “we do not have or want government guarantees for OpenAI datacenters”, adding that taxpayers should not bail out companies that make “bad business decisions”. Instead, perhaps, the government should build its own AI infrastructure and give loan guarantees to support chip manufacturing in the US.
Benedict Evans, a tech analyst, says OpenAI is trying to match the other big AI players such as Mark Zuckerberg’s Meta, Google and Microsoft – itself a leading backer of OpenAI – which are supported by their already hugely profitable business models.
“OpenAI wants to match or exceed the infrastructure – the tens and hundreds of billions of dollars…
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