It’s the driving force behind the fourth industrial revolution and supposed to replace every time-consuming task, but can artificial-intelligence keep track of the barrage of deals fueling its own growth? The flurry of AI partnerships and financing arrangements are complex and hard to follow—and that could be a threat to the market.
OpenAI stole the spotlight again Monday, adding Amazon to its computing partners—although a $38 billion commitment is just a small addition to the more than $1 trillion in total spending the ChatGPT developer has planned. Meanwhile, Amazon and peer Microsoft struck multibillion-dollar deals for additional capacity from Bitcoin miners-turned-AI computing companies.
That’s not all. Google raised $25 billion in debt on the same day, as Wall Street began to severely doubt the idea that AI spending can be fully funded from Big Tech’s cash flows. The solution seems to be the use of
special purpose vehicles to keep borrowing off the balance sheet—as shown by Meta Platforms, which raised around $30 billion that way last month.
All of this is being justified by the overwhelming demand for AI computing. And there are some positive signs. OpenAI CEO Sam Altman said the company’s revenue is “well more” than reports of $13 billion a year and could reach $100 billion by 2027. AI software champion Palantir expects revenue of around $4.4 billion this year, up more than 50% from last year.
Still, those figures pale in comparison with the overall infrastructure investment. The problem, and risk, is circular deals and off-balance sheet arrangements are opaque and make it almost impossible for the average
investor to compare revenue with spending.
It’s hard to see a bubble bursting while interest rates are still coming down. But one feature of the 2008-09 financial crisis was increasingly complex financial
instruments masking the risks. When you need superintelligence just to understand the AI boom, that’s a worrying sign.
—Adam Clark
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OpenAI Strikes Latest Cloud Computing Deal With Amazon
Under pressure to accelerate the growth of its cloud computing business, Amazon struck a $38 billion deal to feed computing power to artificial intelligence start-up OpenAI. Amazon Web Services will provide the
Nvidia-chip-laden infrastructure for the ChatGPT maker’s AI workloads for the next seven years.
- Amazon said the capacity would be deployed by the end of 2026 with the ability for OpenAI to expand the deal in 2027 and beyond. It’s smaller than some other deals OpenAI has arranged this year, including the purchase of an
additional $250 billion of Azure cloud services from Microsoft.
- It shows the evolution of OpenAI from an AI research firm to a driving force in the AI infrastructure buildout, as Bloomberg noted. A lack of computing capacity has constrained revenue growth for firms that should be addressed when more capacity becomes available.
- OpenAI CEO Sam Altman said the deal with Amazon Web Services “strengthens the broad compute ecosystem that will power this next era and bring advanced AI to everyone.” AWS didn’t provide more details beyond the dollar amount and seven-year term.
- Separately, Microsoft will invest nearly $8 billion in the United Arab Emirates over four years, bringing its total investment in the U.A.E. to $15.2 billion this decade. President Brad Smith emphasized its role in exporting U.S. technology to the U.A.E., including tens of thousands of Nvidia’s AI chips.
What’s Next: Microsoft will invest $7.9 billion on AI projects in the U.A.E. over four years. Its role suggests the White House is still reluctant to allow unlimited exports of advanced AI chips to the Middle East, despite the UAE’s pledge to invest $1.4 trillion in the U.S.
—Nate Wolf and Adam Clark
Palantir CEO Karp Touts Its Strong Third-Quarter Results
Palantir began as a defense contractor and has since found other customers selling a platform that funnels data into simple dashboards that use artificial intelligence to aid decision-making. CEO Alex Karp insists it’s not hyperbole to say the third quarter was the best any software company has ever delivered.
- Palantir’s U.S. business continues to see blockbuster growth, up 77% from 2024, boosted by a 121% rise in U.S. commercial sales. Overall revenue rose 63% to $1.2 billion and adjusted earnings of 21 cents a share beat expectations. Government revenue rose 52% from last year.
- The stock reached another record close on Monday, and continued to climb in after-hours trading. Shares have more than doubled this year. Karp told shareholders that it was worth remembering the business produces more profit in one quarter than it did revenue not too long ago.
- Palantir has a devoted online community of retail investors but strong financials and a stratospheric stock valuation have flamed disagreement on Wall Street. Karp addressed the bears in his shareholder letter. “Some of our detractors have been left in a kind of deranged and self-destructive befuddlement.”
- Karp can brag about Palantir’s growing clout inside the Washington beltway, which is helping it land more government contracts such as a $100
million agreement for the Internal Revenue Service and a $400 million agreement for the State Department.
What’s Next: It projected fourth-quarter revenue of $1.33 billion, also ahead of expectations, and said that U.S. commercial sales growth would continue to be in the triple-digits. For the full year it raised its revenue estimate to a range of around $4.39 billion to $4.4
billion, also above expectations.
