Why OpenAI May Run out of Money Before It Can Go Public
OpenAI may be the most coveted private company in the world and still be running out of money.
Tech-optimist investors are already rubbing their palms together in anticipation of OpenAI's expected 2027 initial public offering. Yet, one artificial intelligence expert seriously worries the company can't last that long.
Sebastian Mallaby, whose about to publish a new book on AI, gives OpenAI's CEO Sam Altman credit for being a record-breaking fundraiser. After all, Altman raised $40 billion in a single private round in early 2024. That is nearly triple the $14 billion raised in the next largest round, by any other company, ever.
Even so, Mallaby believes OpenAI's expenses are so astronomical that Altman will find it impossible to raise the hard cash that he needs in 2025 and 2026, long before it gets to the 2025 IPO.
OpenAI has committed to spending $1.4 trillion on data centers. It would take 35 record-breaking, $40 billion funding rounds to raise that amount.
Mallaby is blunt:
Not even Mr. Altman can keep juggling indefinitely. And yet he must raise more — a lot more. However rich the eventual A.I. prize, the capital markets seem unlikely to deliver the money he needs.
The probable result is that OpenAI will be absorbed by Microsoft, Amazon or another cash-rich behemoth. OpenAI’s investors would take a hit. Chipmakers and data center builders that signed deals with Mr. Altman would scramble for new customers, and frazzled investors may dump the whole A.I. sector.
If Mallaby is right, the question isn't how much OpenAI can raise in its initial public offering, but whether it will even survive long enough to have an IPO.
For a Deeper Dive
To read more of Mallaby's argument, check out his opinion piece in The New York Times.
I also recommend you pre-order The Infinity Machine on Amazon. The book is likely to be worthwhile. His book about venture capital, The Power Law, was named as one of the best books of the year by the Financial Times and The Economist.
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