Editor's take: With billions in losses expected for years and obligations stretching deep into the next decade, OpenAI's projections hinge on whether companies and consumers dramatically increase their willingness to pay for AI. In a market still hunting profitable use cases, the company has little choice but to bet that demand will eventually catch up to its ambitions.
OpenAI has embarked on one of the most ambitious – and costly – expansion strategies in Silicon Valley, spending tens of billions annually while posting steep losses. The Wall Street Journal reports that in less than three years since launching ChatGPT, the startup has staked its future on the bet that global demand for AI will surge fast enough to justify its swelling commitments.
Over the past nine months, OpenAI has struck contracts and investments that dwarf those of most tech startups. The company has committed roughly $60 billion annually for computing from Oracle, invested $18 billion in a joint data center venture, and spent $10 billion on custom semiconductors. It is also developing a hardware device aimed at mass-market use.
These deals have locked OpenAI into commitments totaling hundreds of billions over the next decade and reshaped the valuations of some partners. In just the past week, the agreements added over $400 billion in market value to Broadcom and Oracle, making Larry Ellison the wealthiest man in the world in the process.
Despite these extraordinary expenditures, OpenAI continues to lose billions annually. The company told investors it expects $13 billion in revenue this year, a person familiar with the matter told The Wall Street Journal, but internal projections indicate losses will persist for years.
Last fall, CEO Sam Altman told investors that OpenAI would lose $44 billion through 2029, the year he forecasts the startup will finally turn a profit. Altman, who has likened the current wave of AI investment to the dot-com era, also warned that "some AI startups and investors will get burned," though he told The Wall Street Journal he does not expect OpenAI to be among them. The company expects its revenue to more than triple this year, and the company has told investors it could reach $100 billion in sales by 2028 and $200 billion by 2030.
OpenAI's expansion depends heavily on securing funding. Over the past year, Silicon Valley's most prominent investors have poured roughly $50 billion into the company. Microsoft, already one of OpenAI's most influential financial backers, renewed its partnership in a deal announced this week that will help the company restructure into a for-profit entity – a step necessary to unlock about $19 billion in committed funding.
Beneath the optimism lies a critical question: how to convert AI's rapid adoption into lasting profitability. OpenAI now counts over 700 million ChatGPT users – the fastest-growing consumer application in history – but most are not paying customers. According to a survey by Menlo Ventures, only about 3 percent of consumers currently pay for AI services, spending roughly $12 billion in total. The study found that while people experiment with AI for many tasks, consistent willingness to pay remains limited.
Concerns extend to the corporate sector. A June McKinsey report found that eight in ten companies using AI had seen no substantial profit gains. MIT research reached similar conclusions, suggesting that business adoption may take longer and prove more complex than investors anticipate.
The broader economic picture is equally unsettled. In March, Microsoft CEO Satya Nadella framed AI's success in terms of boosting global GDP growth to 10 percent annually, comparable to the industrial revolution. Wharton School projections are far more modest, estimating AI might raise productivity and GDP by just 1.5 percent by 2035.
Even some champions of the technology acknowledge that many players will fail. Dave Blundin, founder of venture capital firm Link Ventures, called AI "the most transformative thing in human history," but warned that the financial shakeout would leave many companies and their investors losing money.
OpenAI's leadership and investors appear undeterred by the risks. Altman has raised more capital than any startup founder before him, fueled by confidence that the company's growth trajectory will continue. Advocates remain equally unshakable in their belief that AI is still in its early stages and that the long-term upside far outweighs today's obstacles.