OpenAI's Stargate Project Drives Tech Stocks Higher, but Financial Concerns Loom
Microsoft and NVIDIA have invested heavily in OpenAI's ambitious projects, with AMD and Oracle also benefiting from the tech giant's expansion. OpenAI's infrastructure costs are set to skyrocket, raising concerns about its financial management.
OpenAI's latest project, Stargate, has attracted significant investment. Microsoft acquired AMD stock options worth 160 million USD to participate in its financing. Meanwhile, NVIDIA has committed up to 100 billion USD, with the money expected to flow back to the company through GPU purchases. These investments have driven up the stock prices of AMD and NVIDIA to 211,510 USD and 185,001 USD respectively on the Nasdaq.
The deals have also boosted the market capitalizations of Oracle and AMD by 244 billion USD and 63 billion USD respectively. OpenAI has created an 'Equity-for-Purchase' model with AMD, pledging to buy GPUs worth up to 90 billion USD in exchange for AMD stock options. Oracle's stock price stands at 284,240 USD on the NYSE.
However, OpenAI's financial strategy has raised eyebrows. Only 17% of its infrastructure costs will come from its own revenues, with a staggering 75% from external capital inflows. Moody's has warned of Oracle's credit dependence on OpenAI, and investors have criticized OpenAI's lack of cost discipline. OpenAI's infrastructure costs are projected to reach 35 billion USD by 2026, with its total infrastructure requirement, including planned data centers with Nvidia and the Stargate project, reaching 114 billion USD.
OpenAI's Stargate project has attracted substantial investments from tech giants, driving up stock prices and market capitalizations. However, its reliance on external funding and the magnitude of its infrastructure costs have sparked concerns about its financial management. As OpenAI continues to expand, investors and analysts will be watching its financial health closely.
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