OpenAI CEO Sam Altman says the company has no plans to seek a government backstop for its $1 trillion worth of data center investments, further walking back comments made by the company\u2019s chief financial officer this week that some interpreted as indicating the company would seek one.<\/p>\n\n\n\n
In an X post Thursday, Altman said the ChatGPT maker neither has nor wants guarantees for its data centers.<\/p>\n\n\n\n
\u201cWe believe that governments should not pick winners or losers, and that taxpayers should not bail out companies that make bad business decisions or otherwise lose in the market,\u201d he wrote. \u201cIf one company fails, other companies will do good work.\u201d<\/p>\n\n\n\n
The post comes amid increasing concerns around the amount of investment going toward artificial intelligence and data centers, a trend some see as stretching stock market valuations to their limit while putting downward pressure on an already shaky labor market.<\/p>\n\n\n\n
\u201cThe Magnificent 7 comprise over 30% of the S&P 500 \u2014 a level of concentration exceeding even that of the dot-com bubble,\u201d analysts at LSEG wrote in a note on Monday. The seven companies include Apple, Meta, Alphabet, Amazon, Microsoft, Tesla and Nvidia.<\/p>\n\n\n\n
These anxieties have led to significant selling in shares of Nvidia, Palantir and other AI-related stocks this week. The Nasdaq 100, a basket of the 100 largest nonfinancial companies that have their shares listed on the Nasdaq exchange, is currently on pace for its worst week since April. This week alone, Nvidia has fallen more than 7%, wiping out more than $400 billion in market value. Microsoft has also slumped 4% and Palantir has plunged 13%.<\/p>\n\n\n\n
Late Wednesday on LinkedIn, OpenAI CFO Sarah Friar clarified comments she made earlier that day during a panel hosted by The Wall Street Journal in which she said she hoped the federal government would play a role in supporting investments in AI. The Journal and subsequently other media outlets seized on the remarks as suggesting the company was seeking a federal guarantee.<\/p>\n\n\n\n
\u201cOpenAI is not seeking a government backstop for our infrastructure commitments,\u201d she wrote. \u201cI used the word \u2018backstop\u2019 and it muddied the point. As the full clip of my answer shows, I was making the point that American strength in technology will come from building real industrial capacity which requires the private sector and government playing their part.\u201d<\/p>\n\n\n\n
Looming behind the reassurance is the question of how OpenAI plans to make good on the $1.4 trillion in commitments it has made to build out AI infrastructure. In September, Friar told CNBC that OpenAI expected to generate approximately $13 billion in revenue this year, raising concerns about its financial trajectory.<\/p>\n\n\n\n
On a tech podcast released last weekend, Altman appeared to grow agitated when host Brad Gerstner asked how OpenAI would fund the commitments given current revenues.<\/p>\n\n\n\n
\u201cEnough,\u201d Altman said according to a transcript posted on X. \u201cI think there\u2019s a lot of people who would love to buy OpenAI shares.\u201d<\/p>\n\n\n\n
In the Thursday post, Altman acknowledged the revenue question is a legitimate one \u2014 but said the company is \u201cfeeling good about our prospects,\u201d pointing to potential revenues from business-use, or enterprise, offerings of its products, as well as unspecified \u201cconsumer devices and robotics\u201d that company leaders \u201cexpect to be very significant.\u201d Another potential revenue source includes AI \u201cthat can do scientific discovery,\u201d Altman said, but added they \u201chave hard time putting specifics on.\u201d<\/p>\n\n\n\n
Analysts are increasingly highlighting potential red flags hanging over the AI investment cycle, especially the web of deals that some say gives the appearance that funds are simply being passed back and forth between the same companies.<\/p>\n\n\n\n
The scale of investments \u201ccould be interpreted as a vote of confidence that the users downstream will crack the profitability code, and an investment that reflects the desire to participate in the resulting growth,\u201d Thomas Shipp, head of equity research for LPL Financial, wrote in a note published Thursday.<\/p>\n\n\n\n
He continued: \u201cA more pessimistic take would be that this circular financing is being used to buttress the financial position of unprofitable business lines to maintain demand for chips. The AI ecosystem has many such relationships.\u201d<\/p>\n\n\n\n
\u201cInvestors have welcomed AI dealmaking and driven share prices higher following deal announcements,\u201d he said. \u201cThat said, we are watching for signs that enthusiasm may be waning.\u201d<\/p>\n\n\n\n