LIVE MARKETS-OpenAI's $1.4 trillion AI ambitions might spark financing fears

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OPENAI'S $1.4 TRILLION AI AMBITIONS MIGHT SPARK FINANCING FEARS

OpenAI's ambition to dominate artificial intelligence is colliding with a brutal financial truth of a $207 billion funding gap by 2030, HSBC said in a note on Monday.

The ChatGPT maker has committed $288 billion in cloud deals in just four weeks, including a $250 billion pact with Microsoft MSFT.O and a $38 billion agreement with Amazon.com AMZN.O.

Those deals push OpenAI's projected compute costs to $1.4 trillion over eight years, leaving a funding gap of at least $207 billion by 2030 and investors nervous over the returns.

"Even after factoring in cash flow, equity facilities and partner contributions, OpenAI will need fresh capital injections or debt issuance to stay solvent," analysts said.

The bank estimates data center rent alone will hit $792 billion by 2030, while annual commitments to partners could top $600 billion if all planned capacity comes online.

OpenAI's revenue is forecast to soar from $12.5 billion this year to $213.6 billion by 2030, while analysts suggest that compute costs will swallow nearly all of it in the near term.

HSBC says doubling paid user penetration to 20% or grabbing a bigger slice of the digital ad market could add $259 billion in extra revenue, still not enough to erase the gap.

Despite the eye-watering numbers, the bank calls AI a "megacycle," arguing that productivity gains across a $110 trillion global economy justify the upfront burn. But with OpenAI targeting 36GW of compute power versus the bank's assumption of 12GW by decade-end, the risk of overreach looms large.

Regardless, Big Tech is smiling as Microsoft, Amazon, Oracle ORCL.N, Nvidia NVDA.O and AMD AMD.O, all stand to benefit from OpenAI's infrastructure binge.

HSBC projects consumer AI revenues to hit $129 billion by 2030, growing at an 82% CAGR, while enterprise AI could reach $386 billion, up 145% annually. Few players, including OpenAI, Anthropic, Google GOOGL.O and xAI, dominate this industry race.

As AI adoption continues accelerating, the report calls attention to the critical roles of infrastructure partners and financial markets in supporting this next wave of innovation.

(Kritika Lamba)

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