AI Spending Risks: Can OpenAI Justify Its Huge Funding Needs?

During their recent episode of the Acquirers Podcast, Travis and Carlisle discussed AI Spending Risks: Can OpenAI Justify Its Huge Funding Needs? Here’s an excerpt from the episode:

I use AI, I love AI. I can see that there’s this enormous demand for it and you can automate all of these great little things in the business. There’s really never been a better time to be a solo entrepreneur.

But having said that, when I look at OpenAI and I look at their obligations for what they’ve got to spend, and when they’re talking like hundreds of billions of dollars, it gives me a little bit of pause, honestly. These are pretty new businesses. They don’t have, I mean, they’ve got revenue, but they don’t have any, they’re nowhere near operating profitability.

And so they’re really relying on the kindness of strangers, continuing to finance all of this. You go through a little wobble in the market and there’s no guarantees.

[Tim] And I mean, why do you have to have chat GPT when you could have, you know, Facebook doesn’t need to make a lot of money off Muse. That’s the reality of it. You know, it doesn’t have to be a huge breadwinner for them.
And yes, that’s right now, it’s not geared towards as many different categories as like a chat GPT or Claude, but it doesn’t take a tonne to turn those levers on in my guesstimation, I guess. So I would agree with you, Toby. I think that that’s a huge risk.

That would probably be what changes the dynamics of it. I mean, capital should be a lot more expensive too with rates where they are. So, I mean, what types of returns are investors going to be comfortable with, you know, allocating to that, to fund that.

So, we’ll see, Toby.