TLDR: A deep dive into financial filings suggests OpenAI is losing an estimated $12.6 billion per quarter, revealing an unsustainable AI bubble. Major tech companies are spending more on AI infrastructure like GPUs and data centers than they make in profit, with these costs now appearing as massive depreciation charges. In this context, OpenAI's recent request for US government support looks less like innovation and more like a desperate plea for a bailout.
The terrifying financial reality behind the AI hype train was revealed by a footnote in Microsoft's recent earnings report. On page 11 of Microsoft's latest 10-Q filing, a tiny note reveals that the company took a $4.1 billion loss from its investment in OpenAI in just the last quarter. Since Microsoft owns a 32.5% stake in OpenAI's for-profit arm, you can do the math yourself. If a one-third stake equals a $4.1B loss, then OpenAI itself lost roughly $12.6 billion in a single quarter. That's not a typo.
The crazy part is that such staggering losses don't even include the biggest cost which is GPUs from Nvidia. OpenAI is clever with accounting. They don't buy these cards directly because that's a massive capital expenditure. Instead, partners like Microsoft buy them and house them in their Azure data centers. OpenAI then "rents" them out.
So, if you look at Microsoft's cash flow, they spent $19.4 billion on property and equipment last quarter. But dig deeper into the notes, and you find the actual cost of their server and data center build-out was $31 billion which is more than their entire net income for the quarter ($27.7B)! They use financing tricks in an attempt to hide the full amount from the main cash flow statement.
This isn't just a Microsoft problem. The video shows the same pattern across Big Tech:
- Amazon spent over $35 billion on Capex last quarter, double their profit.
- Google's capex so far this year is $63.6 billion, about two-thirds of their profit.
- Meta has more than doubled their spending to $18.8 billion.
This is where the bubble becomes visible. All the spending on servers and GPUs now has to be "depreciated" as its cost is recognized over time. For these tech giants, the "Depreciation and Amortization" line item has exploded, now representing ~50% of their profits and growing at over 100% annually. This is a recurring cost that will hit their earnings for years, whether AI is profitable or not. And right now, it isn't. The market for expensive AI subscriptions is limited, and ad-supported models would ruin the user experience. They also have to compete with open Chinese models.
With losses in the tens of billions and no path to profitability, OpenAI recently published a proposal for a "classified Stargate initiative" and its CFO reportedly asked the government for loan guarantees, essentially framing OpenAI as too big to fail.
Sam Altman then went into damage control on Twitter, issuing a series of confusing clarifications that basically said, "We don't want loan guarantees for us... but we'd love it if the government built the infrastructure and ensured the supply chain for us."
The takeaway here is that the companies at the forefront of the AI hype train are now coming to the government with a begging bowl, because the economics of their own business model don't add up.