OpenAI has already lined up enormous long-term commitments — over $500 billion through initiatives like Stargate for U.S. data centers, $250 billion in spending on Microsoft Azure cloud services, and tens of billions on AMD’s plan to deliver 6 GW of Instinct GPUs.
Meanwhile, Oracle has financed its role in Stargate with at least $18 billion in corporate bonds plus another $9.6 billion in bank loans, and analysts expect its total capital need for these AI data centers could climb toward $100 billion.
The risk is straightforward: if OpenAI falls behind or can’t generate enough revenue to support these commitments, it would struggle to honor its long-term agreements. That failure would cascade. Oracle, for example, could be left with massive liabilities and no matching revenue stream, putting pressure on its ability to service the debt it already issued.
Given the scale and systemic importance of these projects — touching energy grids, semiconductor supply chains, and national competitiveness — it’s not hard to imagine a future where government intervention becomes necessary. Even though Altman insists he won’t seek a bailout, the incentives may shift if the alternative is a multi-company failure with national-security implications.
"Even though Altman insists he won’t seek a bailout"
No matter what Sam Altman's future plans are, the success of those future plans is entirely dependent on him communicating now that there is a 0% chance those future plans will include a bailout.
OpenAI doesn't have $500 billion in commitments lined up, it's promising to spend that much over 5 years... That's a helluva big difference than having $500B in revenue incoming.
Data centers take time to build. The capital investment to build these DCs is needed now in expectation that future revenue streams will pay for that capital.
That's not what OpenAI announced. They said initial spend would be $100B, and I'm sure until the ink is dry on each contract, that they can change their mind at any time. No business is going to be placing ironclad commitments four years out.
This is highly unlikely. Imagine OpenAI struggling, and in year 4 of this "commitment" call upon the lenders to provide over $100B in capital. The lenders will definitely have recourse if the risk is too high. Otherwise this would simply be a commercial line of credit, or they would be investing the funds directly in OpenAI now.
> the incentives may shift if the alternative is a multi-company failure with national-security implications.
Sounds like a golden opportunity for GOOG to step over the corpse of OpenAI and take over for cents on the dollar all of the promises the now defunct ex-leader of AI made.
What about OpenAI would rate a bailout? There's too much competition. If they ever do end up in a deep hole and plead for a rescue, I would imagine that gov will just force a sale of assets. Surely Google, MS and Amazon can make use of their infrastructure in exchange for taking on some portion of their debts.
"it would struggle to honor its long-term agreements. That failure would cascade. Oracle, for example, could be left with massive liabilities and no matching revenue stream,"
No, there's a not of noise about this but these are just 'statements of intent'.
Oracle very intimately understands OpenAI's ability to pay.
They're not banking $50B in chips and then waking up naively one morning to find out OpenAI has no funding.
What will 'cascade' is maybe some sentiment, or analysts expectations etc.
Some of it, yes, will be a problem - but at this point, the data centre buildout is not an OpenAI driven bet - it's a horizontal be across tech.
There's not that much risk in OpenAI not raising enough to expand as much as it wants.
Frankly - a CAPEX slowdown will hit US GDP growth and freak people out more than anything.
This is all based on the LLM architecture that likely can't reach AGI.
If they aren't developing in parallel an alternative architecture than can reach AGI, when a/some companies develop such a new model, OpenAI are toast and all those juicy contracts are kaput.
The risk is straightforward: if OpenAI falls behind or can’t generate enough revenue to support these commitments, it would struggle to honor its long-term agreements. That failure would cascade. Oracle, for example, could be left with massive liabilities and no matching revenue stream, putting pressure on its ability to service the debt it already issued.
Given the scale and systemic importance of these projects — touching energy grids, semiconductor supply chains, and national competitiveness — it’s not hard to imagine a future where government intervention becomes necessary. Even though Altman insists he won’t seek a bailout, the incentives may shift if the alternative is a multi-company failure with national-security implications.