OpenAI is driving stock market highs while staying private and unprofitable

OpenAI is pulling U.S. markets higher while staying private and unprofitable. According to CNBC, Sam Altman’s artificial intelligence company is now valued at $500 billion and has been signing contracts worth tens to hundreds of billions of dollars even as it burns cash.

Those deals have already pushed the Nasdaq and S&P 500 to record highs this week after Nvidia agreed to invest up to $100 billion in OpenAI. That agreement came right after a $300 billion deal between OpenAI and Oracle in July under the Stargate program, a $500 billion infrastructure project also funded by SoftBank.

The spending spree has not slowed. On Thursday, CoreWeave announced it had signed to provide OpenAI up to $22.4 billion in AI infrastructure, an increase from the $11.9 billion first announced in March.

Earlier this month, Broadcom said it had secured a new $10 billion customer, and analysts pointed to OpenAI. The company insists that scaling is key for future breakthroughs, but investors are beginning to question the size of the sums and OpenAI’s dependence on a growing network of infrastructure partners.

OpenAI expands its giant web of commitments

OpenAI has been busy building financial links with its suppliers.It took a $350 million stake in CoreWeave ahead of its IPO in March.Nvidia formalized its stake by joining a $6.6 billion funding round in October.

Oracle is spending about $40 billion on Nvidia chips to power one of OpenAI’s Stargate data centers, Cryptopolitan reported from a Financial Times note in May. Earlier this month, CoreWeave disclosed an order worth at least $6.3 billion from Nvidia. Through the $100 billion investment in OpenAI, Nvidia will get equity and earn revenue at the same time.

The revenue gap is huge. OpenAI expects only $13 billion this year. CFO Sarah Friar told CNBC, “When the internet was getting started, people kept feeling like, ‘Oh, we’re over-building, there’s too much. Look where we are today, right?’” Altman told CNBC in August that he is willing to run the company at a loss to prioritize growth and its investments.

Analysts warn about risks tied to Nvidia deal

Some analysts are sounding alarms. They say the Nvidia deal resembles vendor financing patterns that helped burst the dot-com bubble in the early 2000s. Nvidia has been the biggest winner of the AI boom because it makes the GPUs needed to train models and run large AI workloads. Its investment in OpenAI, to be paid out over several years, will help build data centers based on its GPUs.

“You don’t have to be a skeptic about AI technology’s promise in general to see this announcement as a troubling signal about how self-referential the entire space has become,” Bespoke Investment Group wrote in a note to clients on Tuesday. “If NVDA has to provide the capital that becomes its revenues in order to maintain growth, the whole ecosystem may be unsustainable.”

Peter Boockvar, chief investment officer at One Point BFG Wealth Partners, said the names of companies from the late 1990s were ringing in his ears after the OpenAI–Nvidia deal. He added that the transaction is “so much bigger in terms of dollars.”

“For this whole massive experiment to work without causing large losses, OpenAI and its peers now have got to generate huge revenues and profits to pay for all the obligations they are signing up for and at the same time provide a return to its investors,” Boockvar said.

An OpenAI spokesperson referred CNBC to comments from Altman and Friar this week, adding that the company is pursuing “a once-in-a-century opportunity that demands ambition equal to the moment.”

Bain & Company’s 2025 Technology Report says total demand for compute could reach 200 gigawatts by 2030. Building enough data centers to meet that demand would cost about $500 billion a year, meaning AI companies would need a combined $2 trillion in annual revenue to cover the costs.

Even if companies throw their full weight behind cloud and data centers, “the amount would still fall $800 billion short of the revenue needed to fund the full investment,” Bain said.

Despite the concerns, Altman brushed off criticism on Tuesday and rejected the idea that the infrastructure spending spree is excessive. “This is what it takes to deliver AI,” Altman told CNBC. “Unlike previous technological revolutions or previous versions of the internet, there’s so much infrastructure that’s required, and this is a small sample of it.”

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