HSBC spies $207B crater in OpenAI's expansion goals
OpenAI needs to secure $207 billion in new financing by 2030 to fulfill its expansion plans, according to HSBC Global Investment Research – a challenge that could ripple across Big Tech.
The funding shortfall emerged after OpenAI committed $300 billion to Oracle, $250 billion to Microsoft, and $38 billion to AWS for cloud computing services. Even with HSBC's updated revenue projections, which increased 4 percent from earlier estimates, the gap remains substantial.
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In a research paper HSBC shared with The Register, it warns OpenAI "would need $207 billion of new financing by 2030. One unknown parameter is the flexibility that OpenAI may have to adjust its commitment vs effective demand or financial capacity. Capital injections, debt issuance, or higher revenue than in our model would help closing the funding gap."
HSBC predicts that OpenAI's ChatGPT consumer products will attract 3 billion regular users by 2030, up from 800 million last month, and equivalent to 44 percent of the world's population over 15 years old. The bank also forecasts higher subscription rates (10 percent versus 8 percent) and increased corporate demand for APIs and licensing, plus a larger share of digital advertising revenue for AI companies.
Still, these assumptions leave OpenAI with a significant funding gap. The company could bridge that through additional user growth. Another half a billion users would generate a $36 billion boost in revenue, for example. It could improve compute efficiency, raise more capital from its shareholders (hello Microsoft and SoftBank), or increase external debt.
Failure to close the funding gap would hit OpenAI's nearest and dearest tech alliances the hardest.
"The most exposed partners to OpenAI success or failure under our coverage are Oracle, Microsoft, Amazon, Nvidia, and AMD, and so is SoftBank, given its 11 percent stake in OpenAI," HSBC said.
The report rates those first four tech giants as "buy." However, Oracle has already experienced volatility since signing its $300 billion deal with OpenAI.
After announcing the deal in September, part of $455 billion in cloud contracts won – much related to AI compute – Big Red's share price surged 30 percent, briefly making co-founder Larry Ellison the world's richest person. Investment analysts were enthused.
Oracle has since lost all the value it gained in that period, and Ellison has had to hand back his crown. He now ranks third after Google/Alphabet's Larry Page and Elon Musk.
Oracle and the other tech giants OpenAI have made promises to will be hoping the funding gap closes sooner rather than later. ®
