{"id":254479,"date":"2025-11-10T07:28:18","date_gmt":"2025-11-10T07:28:18","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/254479\/"},"modified":"2025-11-10T07:28:18","modified_gmt":"2025-11-10T07:28:18","slug":"heres-what-happens-if-openai-cant-pay-for-its-1-4-trillion-ai-deals","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/254479\/","title":{"rendered":"Here\u2019s What Happens If OpenAI Can\u2019t Pay For Its $1.4 Trillion AI Deals"},"content":{"rendered":"

OpenAI has gone wild with compute deals this year, committing to spend far more than its balance sheet can currently sustain. So who takes the fall if it can\u2019t pay? It won\u2019t be Altman.
\nBy Rashi Shrivastava<\/a>, Phoebe Liu<\/a>, and Richard Nieva<\/a><\/p>\n

Over the last few months, OpenAI CEO Sam Altman has been on a tear of dealmaking, announcing multibillion dollar agreements with the biggest tech companies in the world. There\u2019s Oracle, Nvidia, Microsoft, AMD, Broadcom, and most recently, Amazon. He\u2019s committed to spending a grand sum total of $1.4 trillion on datacenters in the coming years \u2014 an eyebrow-raising figure for a company which claims<\/a> its annual revenue is projected to reach $20 billion this year, begging an all-important question for the entire tech industry, whose fate is now tied to OpenAI: What happens if he can\u2019t pay?<\/p>\n

At an event this week, OpenAI CFO Sarah Friar seemed to suggest<\/a> that the government could act as a \u201cbackstop\u201d for the company\u2019s commitments \u2014 comments she later walked back. And in a long-winded post on X<\/a>, Altman addressed the question of what happens to OpenAI if its web of deals falls apart:<\/p>\n

\u201cIf we screw up and can\u2019t fix it, we should fail, and other companies will continue on doing good work and servicing customers,\u201d Altman said. \u201c…We of course could be wrong, and the market\u2014not the government\u2014will deal with it if we are.\u201d<\/p>\n

The odds don\u2019t look great right now. In order to come through on its compute commitments, OpenAI\u2019s revenue would have to grow to an estimated $577 billion by 2029, roughly the size of Google\u2019s revenue that same year, Tomasz Tunguz, a general partner at Theory Ventures, wrote in a recent blog<\/a> post. That\u2019s a roughly 2900% jump from its current projections for 2025.<\/p>\n

But OpenAI has options. One likely scenario is that the AI company pays for and utilizes only a portion of the compute it has booked, said D.A. Davidson analyst Gil Luria. In that case, companies like Oracle, Amazon, Microsoft, CoreWeave and others will most likely renegotiate the contracts and ensure they get at least some amount of business from OpenAI, especially if the alternative is getting none at all. \u201cThey don’t want OpenAI to go bankrupt, so their incentive is to renegotiate,\u201d he told Forbes.<\/p>\n

\u201cHe\u2019s taking all this commitment knowing that he’s not going to actually face any consequences because he doesn’t have a financial stake.\u201d\n<\/p>\n

Ofer Eldar, a corporate governance professor at the UC Berkeley School of Law.<\/p>\n

Renegotiating contracts isn\u2019t uncommon in the data center world. These contracts are extremely complex and often spread out over a span of years; some parties can even further extend timelines in case companies aren\u2019t able to meet commitments. Clients like OpenAI are typically billed on the basis of usage. The \u201cbig numbers\u201d being announced are often larger than what\u2019s actually committed under contract, largely due to variables like share price, data center construction cost and GPU price, data center expert Daniel Golding said. For instance, OpenAI has committed to buy up to 6 GW of AMD\u2019s chips (estimated to be worth around $90 billion) in exchange for about 10% of AMD shares\u2014no cash on either side. But that hinges on performance milestones for OpenAI\u2019s technology and commercial business as well as AMD\u2019s share price.<\/p>\n

The contracts often have some capital I ifs. Thanks to constraints on power supply and chip availability, there\u2019s a possibility that some of these infrastructure providers aren\u2019t able to deliver in time, another opportunity for OpenAI to weasel out of paying some of the top line number. OpenAI\u2019s $22.4 billion in total contracts with CoreWeave<\/a>, for instance, can be terminated by either party at any time \u201cfor cause\u201d (legal speak for things like delays).<\/p>\n

But even with about a trillion dollars on the line, the bigger risk in Altman\u2019s mind is not having access to enough cheap compute to train and run better AI models when the time comes\u2014 a move that is crucial for revenue growth. \u201cWe believe the risk to OpenAI of not having enough computing power is more significant and more likely than the risk of having too much,\u201d he said, adding that the company is also exploring ways to sell compute to other companies directly, much like CoreWeave does. When reached for comment, OpenAI spokesperson Steve Sharpe said the company has \u201cnothing to add.\u201d<\/p>\n

Without A Stake, Altman Doesn\u2019t Have Anything To Lose <\/p>\n

Altman\u2019s fixation on grabbing as much gargantuan compute as he can is not surprising. He has always knelt at the altar of scaling laws. Earlier this year, Altman mused on the coming of AGI, or artificial general intelligence, the company\u2019s overarching goal of creating AI that matches or surpasses human capabilities. \u201cThe intelligence of an AI model roughly equals the log of the resources used to train and run it,\u201d he wrote<\/a>, noting you could get \u201ccontinuous and predictable gains\u201d from pumping money into those resources. \u201cThe scaling laws that predict this are accurate over many orders of magnitude,\u201d he wrote.<\/p>\n

Even before ChatGPT was released, he told<\/a> employees at his crypto-cum-identity company Worldcoin (now called World), that one of his personal operating principles is \u201cscale it up and see what happens,\u201d something he\u2019s found effective with everything from large neural networks to fusion reactors, Forbes reported. And the faster the better. Scaling up \u201cearlier than it makes sense to \u2026 is super, super valuable,\u201d he told Worldcoin employees.<\/p>\n

\u201cThe math that Mr. Altman is doing in his head is \u2018they need me more than I need them.\u2019\u201d\n<\/p>\n

Gil Luria, \u00a0D.A. Davidson analyst<\/p>\n

Experts note chief dealmaker Altman doesn\u2019t have anything to lose. He has repeatedly claimed he does not have a stake in the company, and won\u2019t have a stake even after OpenAI has restructured to become a public benefit corporation. \u201cHe has the upside, in a sense, in terms of influence, if it all succeeds,\u201d said Ofer Eldar, a corporate governance professor at the UC Berkeley School of Law. \u201cHe’s taking all this commitment knowing that he’s not going to actually face any consequences because he doesn’t have a financial stake.\u201d<\/p>\n

That\u2019s not good corporate governance, according to Jo-Ellen Pozner, a professor of management and entrepreneurship at Santa Clara University\u2019s Leavey School of Business. \u201cWe allow leaders that we see as being super pioneering to behave idiosyncratically, and when things move in the opposite direction and somebody has to pay, it’s unclear that they’re the ones that are going to have to pay,\u201d she said.<\/p>\n

Luria adds: \u201cHe can commit to as much as he wants. He can commit to a trillion dollars, ten trillion, a hundred trillion dollars. It doesn’t matter. Either he uses it, he renegotiates it, or he walks away.\u201d There are of course more indirect stakes for Altman, experts said, like the reputational blow he\u2019d take if the deals fall apart. But on paper, he\u2019d seemingly be off the hook, they said.<\/p>\n

As OpenAI has grown in prominence, tech giants have clamored to strike deals with the AI behemoth. \u201cMore of the world wants to work with us, so deals are quicker to negotiate,\u201d Altman said recently<\/a>. And they\u2019ve reaped the upsides: Oracle, Nvidia, AMD and Broadcom gained a collective $636 billion<\/a> in market cap on the days their deals were announced. Most recently, when OpenAI announced a $38 billion AI infrastructure deal with Amazon on Monday, the company\u2019s stock increased 4%, adding $10 billion to Jeff Bezos\u2019 net worth. \u201cThe math that Mr. Altman is doing in his head is \u2018they need me more than I need them,\u2019\u201d Luria said.<\/p>\n

Companies involved in these circular deals have already indicated they\u2019re willing to bail each other out. In September, Nvidia said it would buy CoreWeave\u2019s unsold computing capacity through 2032, initially worth $6.3 billion. Presumably, that could expand to include anything OpenAI doesn\u2019t use given that it\u2019s CoreWeave\u2019s largest customer.<\/p>\n

\u201cIf you owe the bank a hundred thousand dollars, the bank owns you. If you owe the bank a hundred million dollars, you own the bank,\u201d said Lloyd Walmsley, a Mizuho analyst who covers Meta, Google and Amazon. \u201c\u200aEveryone’s holding hands and, and having this leap of faith that the products are so powerful.\u201d<\/p>\n

The Best And Worst Case Scenarios<\/p>\n

It\u2019s also possible that OpenAI uses all the compute it has booked, and needs more. In that case, the AI titan will need to raise more funding\u2014either through private or public markets\u2014and increase its revenue exponentially. Part of why Altman has spoken about a potential OpenAI IPO is that it would make raising cheaper debt much easier. Altman said on Thursday <\/a>that he\u2019s confident that revenue will continue to grow, primarily from upcoming enterprise products and categories like robotics and consumer devices.<\/p>\n

Then, take the extreme case. If OpenAI were to file for bankruptcy protection, who would get paid first? Who would, in Sam Altman\u2019s words, \u201cget burnt\u201d? For one, it\u2019s entirely possible that some cash-rich company, perhaps one on the other end of one of its big contracts like Microsoft or Oracle, buys it in a fire sale. In the very unlikely event OpenAI goes bankrupt and liquidates instead, debtholders would get their money back first. Then equity investors, and finally\u2014if there\u2019s anything left over\u2014common shareholders.<\/p>\n

OpenAI has only announced one debt deal so far, a $4 billion credit facility with nine banks including JPMorgan, Citi, Goldman Sachs and Morgan Stanley. The company announced the loan in October 2024 and said it is a revolving credit facility (akin to a giant corporate credit card). It\u2019s unclear if OpenAI has additional debt, which it isn\u2019t required to disclose as a private company.<\/p>\n

\u201cIf you owe the bank a hundred thousand dollars, the bank owns you. If you owe the bank a hundred million dollars, you own the bank.\u201d\n<\/p>\n

Lloyd Walmsley, a Mizuho analyst who covers Meta, Google and Amazon.<\/p>\n

King among OpenAI\u2019s equity holders is Microsoft, which owns 27% of the company following OpenAI\u2019s restructuring as a for-profit company last week. Microsoft has invested $11.6 billion of its $13 billion commitment to OpenAI, and OpenAI has committed to purchase $250 billion of Microsoft Azure\u2019s compute services over the coming years. The companies have two-way plans to share revenue. \u201cOf the dominoes that are going to fall when OpenAI can’t pay everybody [and the question arises of] who gets paid first, and I’d argue that Microsoft gets paid first,\u201d Luria added. Other large shareholders include Thrive, SoftBank, Dragoneer and investors in the $6 billion merger between Jony Ive\u2019s io and OpenAI.<\/p>\n

Common shareholders\u2014employees, cofounders and the nonprofit\u2014would get what\u2019s left, proportionally to how much they paid for their shares. Interestingly, OpenAI\u2019s nonprofit holds a special \u201cClass N\u201d common share, which gives it majority voting and veto power in elections of board directors, though that share isn\u2019t entitled to any financial return if the company were to go under. (The nonprofit\u2019s 26% stake likely also includes ordinary common shares.)<\/p>\n

Altman\u2019s wheeling and dealing is nothing short of mind-boggling, though many of the biggest payments aren\u2019t due for a few years. In the AI universe, that\u2019s plenty of time to figure out how he\u2019s going to pay for it all, whether it\u2019s additional fundraising or explosive revenue growth. Seems like nobody knows the answer just yet, not even him.<\/p>\n

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