AI closed-loop trading sparks new controversy: OpenAI invests in Thrive Holdings, possibly targeting more private equity firms

OpenAI, which was reportedly valued at $500 billion a month ago, is consolidating its ecosystem in the artificial intelligence (AI) sector through a series of circular transactions, further intensifying market doubts about closed-loop deals in the AI industry.

On Monday, December 1, Eastern Time, OpenAI announced its investment in Thrive Holdings—a platform founded in April this year by Thrive Capital, a major investor in AI and venture capital. Thrive Holdings focuses on acquiring and transforming businesses that can benefit from AI technology, adopting a private equity (PE) strategy to acquire service providers and seek business transformation driven by AI. According to sources cited by media reports, OpenAI is "very interested in broader cooperation with the PE industry."

Under the agreement announced on Monday, OpenAI will acquire equity in Thrive Holdings without a cash investment, instead exchanging technical support and team resources for "meaningful" equity. In return, OpenAI will send engineering, research, and product teams to Thrive Holdings’ portfolio companies to accelerate AI implementation and improve cost efficiency.

According to the media, insiders revealed that OpenAI will be compensated from Thrive Holdings’ future financial returns and gain access to data from acquired companies to train its AI models. If Thrive Holdings’ portfolio companies see performance growth, the value of OpenAI’s equity will also increase accordingly.

OpenAI’s Chief Operating Officer Brad Lightcap said that in the early stages of the partnership with Thrive Holdings, the focus will be on accounting and IT services, hoping this model can become a template for deep global corporate collaboration with OpenAI.

This partnership highlights OpenAI's urgent need to pivot towards enterprise clients. OpenAI CEO Sam Altman recently announced that the company will vigorously expand into the enterprise market. Currently, ChatGPT has around 800 million weekly active users, but only 1 million enterprise clients, including Spotify and Canva. For OpenAI and its competitors, proving the commercial value of AI systems and signing up more clients is vital to offsetting the massive costs of building and operating AI systems.

Also on Monday, OpenAI announced a partnership with consulting firm Accenture to promote ChatGPT Enterprise to tens of thousands of its employees.

The timing of this deal is particularly sensitive. At the end of last year, Thrive Capital invested over $1 billion in OpenAI; now OpenAI is taking a stake in an entity set up by this investor. Media outlets revealed that this arrangement aims to realign incentives between the two sides for the long term. However, investors and analysts are increasingly concerned that technology companies, by swapping equity, chip deals, and cloud computing contracts for financing and services in the AI race, are artificially inflating the AI boom.

Founded by Josh Kushner, Thrive Capital is known for making a few big bets and holding long-term. The firm first invested in OpenAI in 2023 at a valuation of $27 billion, later leading a $6.6 billion fundraising round that drove OpenAI's valuation up to $157 billion. Now, with OpenAI investing in Thrive Holdings, the startup holds shares in an entity set up by its own investor, forming a web of intertwined interests.

Such circular transactions are coming under greater scrutiny. In recent months, OpenAI has signed similar deals with chip suppliers Nvidia, AMD, and others, exchanging commitments to large-scale purchases for equity investments. In May of this year, OpenAI also acquired the hardware startup io for $6.5 billion, using an all-stock deal without any cash. Analysts worry this increasingly complex web of deals may be artificially supporting AI prosperity, rather than reflecting real market demand.

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