OpenAI To Burn $115 Billion–That’s All?
OpenAI is projected to burn through $115 billion by 2029, an increase from the previous estimate of $80 billion. This spending is part of a larger trend, with major tech companies like Microsoft, Meta, and Amazon expected to invest a combined $250 billion this year alone. OpenAI's valuation could rise with further equity sales, currently estimated between $300 billion and $500 billion. However, its position in the AI market may be challenged if it fails to capitalize on enterprise distribution, which is crucial for revenue generation.
Tech media site The Information says OpenAI, arguably the global AI leader, will burn through $115 billion by 2029. It also stated that the figure is up from $80, when the previous numbers were published. The figure will get progressively higher from this year until the end of the period. It is a fraction of what Microsoft (NASDAQ: MSFT) and Meta (NASDAQ: META) will invest. For them, it will not cause a loss. Each has too much money, large net incomes, and outside capital to help it invest.
To use a yardstick for comparison, Meta says it will spend $70 billion in 2025 alone. Microsoft says it will spend $80 billion. Amazon (NASDAQ: AMZN) says it will spend $100 billion. So, just this year, these three companies will “burn through” $250 billion. And, almost every expert in AI data center costs believes that the number will go up each year in the foreseeable future. That will put total investment in the next few years into the trillions of dollars.
OpenAI will likely raise money by selling more equity. Round after round, its valuation will probably push upward. Its current valuation is between $300 billion and $500 billion. If OpenAI stumbles in revenue or adoption, that figure could flatten. Or, there could be a down round.
Microsoft has $100 billion in cash and short-term investments on its balance sheet. It will have access to capital from financial firms. These institutional investors believe there is a great deal of money to be made in building data centers and also creating infrastructure to generate and move electricity. Whether that will be “smart money,” will depend on if AI continues its white hot pace of adoption.
The OpenAI figure shows it may not end up being among the top two or three AI companies. It appears to have a lead, but not in distribution to enterprise customers. That is where the big money is–adding AI to cloud computing, existing software products, and new products to harness AI for the enterprise market.
OpenAI is expected to burn through $115 billion between now and 2029. Based on industry trends, the figure is less than modest.
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