When you purchase through links on our site, we may earn an affiliate commission. Here’s how it works .
The company is banking on explosive growth to fund all these expenses, with Altman and Friar saying in a joint statement to WSJ , “We are totally aligned on buying as much compute as we can and working hard on it together every day.” Many corporate investors felt that it was on the right track, with the startup raising $122 billion in its latest funding round, exceeding it $100 billion target . However, one analyst said that OpenAI could run out of cash by mid-2027 unless it continues bringing in massive amounts of investments, like what we saw recently.
Even though executives from Nvidia, Oracle, SoftBank, and many other companies invested in OpenAI see potential, the market is beginning to doubt them. As soon as the news of OpenAI’s shortfall started circulating, MarketWatch reported that firms with heavy involvement in the AI firm saw a drop in their stock prices during pre-market trading. This included Nvidia (-1%), AMD (-4%), Oracle (-5%), and CoreWeave (-5%). SoftBank closed at 9.9% lower in the Tokyo Stock Exchange, making it one of the worst performers in the Nikkei 225.
Microsoft seems to be the only company that’s closely intertwined with OpenAI and hasn’t been affected by a drop in stock prices. That’s because although it has ended its exclusivity agreement with OpenAI recently, it still holds 27% of OpenAI’s for-profit business and has invested billions into the startup.
While OpenAI kickstarted the LLM race when it publicly released ChatGPT in December 2022, many other competitors have since gained ground. The company has lost market share to Anthropic and its Claude family of models, especially among programmers and corporate users. Google 's Gemini family has also started to outpace ChatGPT in several benchmarks , leading OpenAI CEO Sam Altman to declare a “Code Red” late last year.
Despite this, Altman has signed deals worth billions of dollars to secure future computing power, including a 4.5-gigawatt contract with Oracle worth $300 billion and a $100 billion alliance that will deliver 10 gigawatts’ worth of Nvidia hardware to data centers.
The market has seemingly panicked about the news of OpenAI’s missed targets, renewing fears that the AI fever among investors could break. Nevertheless, it seems that Altman is pushing to acquire more computing power, arguing that shortages in capacity is what’s limiting the startup’s growth. Anthropic CEO Dario Amodei once said in a conference that some companies are pushing for infrastructure investments too far, but OpenAI disagreed. In a memo addressed to its investors, OpenAI said, “In hindsight, that caution looks less like discipline and more like underestimating how fast demand would arrive" — a statement that might now seem overly optimistic.
Get Tom's Hardware's best news and in-depth reviews, straight to your inbox.
Key considerations
- Investor positioning can change fast
- Volatility remains possible near catalysts
- Macro rates and liquidity can dominate flows
Reference reading
- https://www.tomshardware.com/tech-industry/artificial-intelligence/SPONSORED_LINK_URL
- https://www.tomshardware.com/tech-industry/artificial-intelligence/market-slumps-as-openai-reportedly-misses-internal-targets-for-active-users-and-revenue-nvidia-oracle-amd-and-coreweave-shares-all-tremble-on-the-news#main
- https://www.tomshardware.com
- Into the Omniverse: NVIDIA GTC Showcases Virtual Worlds Powering the Physical AI Era
- Save over $150 on this fantastic Elegoo resin 3D printer with 16K resolution and a tilting vat — Saturn 4 Ultra 16K is on sale for just $493 right now on Amazon
- Astro A20 X review: For PC gamers with a console
- Gigabyte X870E Aorus Xtreme X3D AI Top motherboard review: The latest and greatest Xtreme
- News site linked to OpenAI super PAC sent bots posing as journalists to interview real people — site has published nearly 100 articles with real quotes gathered
Informational only. No financial advice. Do your own research.