Is OpenAI building its future on debt? Study reveals partners are burdened with $96 billion in loans

Companies that have tied up with OpenAI to supply data centres,chips, and “compute” processing power have borrowed about $96 billion in debt to fund their operations, according to a recent analysis by The Financial Times.

According to the report, companies like SoftBank, Oracle and CoreWeave have borrowed at least $30 billion to invest in the loss-making startup as it benefits from a deb-fuelled spending spree without having to take any financial birden itself.

This highlights the AI industry's rising reliance on debt and its increasing dependence on one particular company for future gains.

At present, the revenues generated by AI companies, and the data centre operators rapidly expanding to serve them, are nowhere near the ballpark to cover the build-out costs.

“That’s been kind of the strategy. How does [OpenAI] leverage other people’s balance sheets,” FT quoted a senior OpenAI executive as saying.

OpenAI has already been under scrutiny for its $1.4 trillion in commitments to procure the energy and computing power for its future operations over the next eight years. The amount of loans, on track to touch $100 billion soon, will add to the scrutiny.

The commitments exceed OpenAI's projected annualised revenue of $20 billion this year.

How much loan have OpenAI partners taken so far?

Here is a breakdown of the amount of loans taken by OpenAI's partners so far, according to FT:

• SoftBank, Oracle, and CoreWeave have already borrowed a total of $30 billion for OpenAI.
• As much as $28 billion has been taken in loan by Blue Owl Capital and Crusoe.
• Meanwhile, Oracle and Vantage and their banks are already in talks to borrow another $38 billion to fund OpenAI operations.

This makes the total amount of debt jointly taken by these companies come down to about $96 billion. Meanwhile, OpenAI has little debt on its own balance sheet, according to FT quoting people in the know. The startup has a credit facility worth $4 billion with many US banks, which it had secured last year but is yet to use.

The increasing use of debt is a relatively new development in the world of AI. Earlier, most AI build-out was funded by cash from the kitty of big tech companies, such as Microsoft, Alphabet, Amazon, and Meta.

“Building AI infrastructure is the single most important thing we can do to meet surging global demand . . . The current compute shortage is the single biggest constraint on OpenAI’s ability to grow,” OpenAI has said.