The Information Finance

Why Big Tech Companies Are Racing to Fund OpenAI

Art by Mike Sullivan
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Nvidia could invest around $30 billion, Amazon is down for at least $20 billion and Microsoft is looking at $10 billion as part of a $100 billion fundraising for OpenAI. SoftBank will bring the AI company closer to its goal with an investment worth around $30 billion. 

My colleague Sri Muppidi reported all of this last week. OpenAI has built amazing products and could be a world-changing company, but these numbers don’t make sense. Tough competition, huge cash burn and an uncertain path to profitability are just some reasons.

Maybe the companies making these investments see something I don’t. Maybe their motives are purely financial, and they believe OpenAI is a bargain at this round’s $730 billion valuation. A tripling of the company’s value would put it at a modest $2 trillion. 

If you’re skeptical about these numbers, there are other more concerning reasons why the world’s richest companies and one of its biggest investors are writing big checks.

One is that OpenAI is facing growing skepticism from the markets about its cash burn and future profitability. OpenAI has effectively funded its data center buildout by leveraging the balance sheets of its partners, including Oracle, CoreWeave and Vantage Data Centers. That strategy may no longer work, or it may get very expensive. 

Investors have signaled that there’s a limit to how much they’ll lend to companies relying on OpenAI to pay its bills in the future (more on Oracle’s big fundraising this week below). They’ve driven up yields on those companies’ bonds and driven down their share prices.

That’s in contrast to the way investors view the tech giants. Despite big boosts in capital expenditures and a wave of borrowing, investors have been generally enthusiastic about big tech’s bet on AI. The caution has instead come from the big companies, including Meta Platforms, Alphabet, Amazon and Microsoft. They have funded most of the AI buildout from their cash reserves and kept their borrowing modest. Even if they did try to borrow more, they would likely run up against limits investors have on their exposure to a single company. 

The tech giants’ investments in OpenAI solve all of these problems. They offer OpenAI the cash it needs to give confidence to its supplier’s lenders. At the same time, they’re not counting the money as capital expenditures, nor are they funding it with debt, at least not so far.

This week, Oracle also nodded to the growing anxiety among investors when it announced a $25 billion bond offering. Before it sold the debt, the company announced it would fund half of its capital needs this year by selling equity. It also told investors it was serious about maintaining its investment-grade credit rating. “The fact they’re willing to take dilution was definitely a surprise to the market,” said Mike Talaga, global head of credit research at investment company Janus Henderson Investors, which invested in the offering. Oracle’s bonds have been trading at junk levels, but that commitment excited investors, who put in $125 billion in orders for the $25 billion in bonds. 

There’s another possible explanation for these investments. For some companies, it’s a variation of what Nvidia did all of last year: creating circular financing deals that send money to its own customers. Those deals similarly created anxiety among investors. 

Circular investments mean different things to different companies. For Nvidia, investing in a company that then buys Nvidia’s chips is a way to fend off competition and lock in growth. For Microsoft and Amazon, it means getting more cloud business from OpenAI. Microsoft has more at stake because it owns 27% of OpenAI’s public benefit corporation and OpenAI has agreed to purchase $250 billion of services from Microsoft’s Azure cloud business. And Amazon last fall signed a $38 billion cloud deal with OpenAI. 

Whatever the motivation is for the tech giants’ big investments in OpenAI, the impact is the same: Cash-rich companies are giving OpenAI some financial breathing room until its revenue and profits make it sustainable or at least bring it close enough that the market will open the funding spigots.

The question is how long that will take, and whether the tech giants will continue writing checks until that happens. Microsoft shares are down nearly 14% since it reported earnings. Investors have grown more worried about the company’s dependence on OpenAI as a customer and whether it is getting a return on its AI spending. Oracle’s bond investors may have been happy with its bond offering, but owners of Oracle stock were not. That’s one of the reasons the company’s shares are down 9% this week. 

The AI funding dance was also on display in Elon Musk’s shotgun wedding between SpaceX, which generated roughly $8 billion in earnings before interest, taxes, depreciation and amortization in 2025, and xAI, which burned $9.5 billion in the first nine months of last year. 

Combining the companies will hide some of xAI’s weaknesses from investors. Musk’s problem is that the two businesses are very capital intensive, so he has less wiggle room than the tech giants backing OpenAI. 

Bankers are very good at finding ways to keep the cash flowing. AI may be the greatest test of those skills.