“OpenAI missed internal targets for weekly users and revenue, raising concerns among leaders about funding massive new data center spending.”
“Chief Financial Officer Sarah Friar told other company leaders she is worried about future computing spending if revenue growth is insufficient.”
“Board directors examined data-center deals more closely in recent months and questioned efforts to secure more computing power amid the business slowdown.”
“OpenAI recently missed its own targets for new users and revenue, stumbles that have raised concern among some company leaders about whether it will be able to support its massive spending on data centers.”
“Chief Financial Officer Sarah Friar has told other company leaders that she is worried the company might not be able to pay for future computing contracts if revenue doesn’t grow fast enough, according to people familiar with the matter.”
“Board directors have also more closely examined the company’s data-center deals in recent months and questioned Chief Executive Sam Altman’s efforts to secure even more computing power despite the business slowdown, the people said.”
The question again is the perennial one of expending unprecedented amounts to build AI Data Center Infrastructure in the hundreds of billions, as revenues ramp up in the tens of billions. And the time range it’ll likely take for the two to cross in the right direction.
“The spending scrutiny is constraining Altman’s once-boundless ambitions ahead of a potential initial public offering that could take place by the end of the year. Friar and other executives are now seeking to control costs and instill more discipline in the business, at times putting them at odds with their CEO, people familiar with the issue said.”
“We are totally aligned on buying as much compute as we can and working hard on it together every day,” Altman and Friar said in a joint statement. Any suggestion that the pair are divided or pulling back on securing new computing resources is “ridiculous,” they said.”
“For years, Altman has sought to lock up as much data-center capacity as possible, arguing that computing shortages were the biggest constraint to OpenAI’s growth. He went on a dealmaking spree last year that put OpenAI on the hook for some $600 billion in future spending commitments, and tied much of the tech sector’s success to OpenAI’s.”
The company ran with that momentum farther than any of its peers on its roadmap to AGI:
“The “buy everything” computing strategy was buoyed by ChatGPT’s seemingly invincible success, and had the support of both Friar and the board. But the chatbot’s growth slowed toward the end of last year, sowing fresh doubt among company leaders about the approach.”
For now, the metrics important for public investors, are not moving at the pace needed. Specifically the 900+ million weekly ChatGPT users OpenAI has been emphasizing officially since February this year, but really since late last year.
“OpenAI missed an internal goal of reaching one billion weekly active users for ChatGPT by the end of last year, according to people familiar with the goals. The company still hasn’t announced that milestone, unnerving some investors. It also missed its yearly revenue target for ChatGPT as well after Google’s Gemini saw massive growth late last year and ate into OpenAI’s market share, the people said. The company has also struggled with defection rates among subscribers, according to people familiar with those figures.”
“OpenAI missed multiple monthly revenue targets earlier this year after losing ground to Anthropic in the coding and enterprise markets, people familiar with its finances said.”
Despite all the above, OpenAI did have some watershed financing moments to date:
“OpenAI recently raised $122 billion in what was the largest funding round in Silicon Valley history, putting it on more solid financial footing. But the company has signed up for so much computing power that it expects to burn through that amount in the next three years, assuming that it meets ambitious revenue targets. Some of the funding is also conditional and depends on specific agreements with partners.”
And a number of things moving in the right direction:
“The company’s coding tool Codex is growing quickly in popularity, and it is shaving costs by cutting other projects such as its video-generation app Sora. OpenAI recently released GPT-5.5, a powerful model that topped a number of industry benchmarks.”
“A number of AI companies including Anthropic have faced a capacity crunch for computing in recent weeks, leading to price increases for access to AI processors, outages and rationing. The challenges have rankled power users of AI products, especially coders who have grown frustrated when AI systems have been unable to finish tasks in a way they had come to expect from past use.”
For now OpenAI also enjoyed an AI Compute buildup that’s bigger than Anthropic:
“OpenAI said in a recent memo to investors that it has been able to secure more computing capacity than Anthropic, giving it an advantage in reaching users. The memo, which was viewed by The Wall Street Journal, also addressed Anthropic CEO Dario Amodei’s veiled criticism of OpenAI at a recent business conference, when he said some companies had pulled “the risk dial too far” on data-center spending.”
“In hindsight, that caution looks less like discipline and more like underestimating how fast demand would arrive,” the OpenAI memo said.”
Nevertheless, there’s a lot of wood to chop ahead of an IPO later this year. Especially as Anthropic and Elon’s SpaceX/xAI are aiming for their own trillion plus dollar IPOS at the same time. Something big investors are already assessing and debating in these extraordinary times, as the Information highlights from a recent investor conference:
“Potential IPO missteps from SpaceX, Anthropic, and OpenAI threaten AI investment.”
“AI buildout requires $300B-$400B to be financed annually, a huge new market for capital.”
“AI disruption creates a “tsunami” for enterprise software and new financing models.”
It’s in that context that ex-Goldman Sachs analyst and now OpenAI CEO Sarah Friar is voicing the preparation ahead for OpenAI and its IPO plans:
“In recent months, Friar has also expressed reservations about OpenAI’s plans to go public by the end of this year, according to people familiar with the matter.”
“She has emphasized to executives and board directors the need for OpenAI to improve its internal controls, cautioning that the company isn’t yet ready to meet the rigorous reporting standards required of a public company. Altman has favored a more aggressive timeline for an IPO, some of the people said.”
“OpenAI has to work through a slate of other issues ahead of a public listing. The company is currently experiencing a leadership vacuum after its second-in-command, Fidji Simo, unexpectedly took medical leave earlier this month. Separately, court proceedings began this week in a lawsuit by Elon Musk in which he is seeking to oust Altman and unwind OpenAI’s conversion into a for-profit company.”
“OpenAI said its consumer and enterprise businesses are “firing on all cylinders” despite a report about missing internal targets.
The company described the report as “prime clickbait” and said the mood internally is “incredibly positive” with growth in demand from business customers and its advertising business.
OpenAI backers and partners saw shares sink on the news, with the company’s CFO reportedly expressing concern about affording future computing needs if sales don’t grow fast enough.”
All of this continues to highlight the ‘best of times, worst of times’ dynamic I’ve been outlining for OpenAI for some time now.
And it doesn’t look like the storms are going to let up anytime soon this AI Tech Wave for them. Stay tuned.
(NOTE: The discussions here are for information purposes only, and not meant as investment advice at any time. Thanks for joining us here)
