Why are tech giants all investing heavily in OpenAI?

The so-called $100 billion financing is essentially a self-rescue "blood transfusion" by tech giants to prevent the AI bubble from bursting. On February 4, senior reporter Ken Brown from The Information reported that OpenAI is raising as much as $100 billion. Nvidia may contribute $30 billion, Amazon $20 billion, SoftBank $30 billion, and Microsoft may also chip in $10 billion. Given OpenAI’s outrageous $730 billion valuation, why are these smart companies rushing to pump in money? In Brown’s view, the logic is very straightforward. ## Banks no longer trust OpenAI — the tech giants have to step in themselves Previously, OpenAI was clever enough not to borrow money itself. Instead, it let partners such as Oracle, CoreWeave, and Vantage Data Centers borrow money using their own balance sheets to build data centers, with OpenAI to make payments later under contract. OpenAI essentially "painted big pies" and the partners used them to obtain loans from banks. However, this strategy now faces huge market resistance. Ken Brown points out: > "Investors have already indicated their willingness to lend to companies relying on OpenAI to pay future bills is limited." Now, bond market investors are becoming rational. They realize OpenAI is burning cash too fast and won’t be able to pay rent in the future. As a result, lenders are raising financing costs for Oracle and others, even treating their bonds as "junk bonds." They’ve realized that if OpenAI’s future cash flow cannot cover these debts, the partners acting as contractors face default risks. As the report says: > "This strategy may no longer work, or could become very expensive." Ironically, Oracle is even being forced to announce it will issue new shares to raise funds — anxiety in the market is soaring. Mike Talaga, Head of Credit Research at Janus Henderson, says: > "The fact that Oracle is willing to dilute equity to raise capital has really shocked the market." Yesterday, Wallstreetcn mentioned that faced with Oracle's massive AI infrastructure financing needs, Wall Street banks are close to the limit of their balance sheets. To reduce risk exposure and free up lending capacity, banks are rushing to securitize and rate tens of billions in loans linked to Oracle data center projects, selling them on to insurers and private credit funds. And when banks stop lending to OpenAI’s contractors, OpenAI’s server farm construction has to stop. ## But why are the tech giants willing to be the "guarantors"? As external funding sources dry up, the tech giants get anxious. If the data centers shut down, OpenAI can’t train its models; without model training, it doesn’t need Nvidia’s chips, nor Microsoft’s cloud services. **Thus, this $100 billion financing becomes "circular funding":** - **Microsoft** shells out money to protect $250 billion in Azure cloud orders. Microsoft holds about 27% of OpenAI’s public benefit company, and OpenAI has agreed to purchase about $250 billion worth of Azure services. - **Amazon** invests money essentially to lock in more cloud business — to secure that $38 billion cloud contract. - **Nvidia** gives money to make sure OpenAI can afford to buy its GPUs — a way to "lock in growth and prevent competition." This is a classic case of "I lend you money, so you can buy my stuff." **Secondly, giving OpenAI cash is to reassure the creditors in the supply chain.** With big tech's capital injection, OpenAI gains certainty it can pay its bills, so supply chain financing won’t further inflate in bond markets. For OpenAI, it's about buying time: waiting until revenue and profits "grow enough for self-sufficiency," or at least until market financing channels reopen. **Thirdly, tech giants externalize the pressure of capital expenditure by treating it as "investment", instead of making their own financial statements look uglier — stabilizing share prices.** Author Ken Brown emphasizes that a realistic benefit of investing directly in OpenAI is: this money doesn’t count as capital expenditure for the giants, nor does it require new debt (at least for now). As AI capital spending is closely watched by the markets, these accounting and financing nuances help relieve short-term valuation pressure. ## A game of musical chairs where no one can afford to lose Why can’t OpenAI be allowed to collapse? Because the systemic risk is huge. **Right now, most of the big tech giants’ share prices reflect the "AI premium." If OpenAI falls because it can’t pay for electricity or chips, the whole AI sector’s logic collapses.** Market founder Mark Montgomery likened this to "musical chairs": > "Unless OpenAI’s Altman can find more funding to keep the balloon inflated, if it bursts, big tech companies’ valuations could shrink by 50% to 80%." Simply put, the giants don’t really think OpenAI is worth $730 billion; they spend $100 billion for insurance because otherwise, their own lost valuation would be ten times that figure. Marathon Venture Capital partner Panos Papadopoulos wrote in the comments: **"If OpenAI reduced its commitment spending with hyperscale cloud vendors, they could lose $1 trillion in market value — what’s $10 billion between friends?"**  The same "financing dance" is happening in Musk’s deals. The article notes that SpaceX will generate about $8 billion in EBITDA in 2025, while xAI burned through about $9.5 billion in the first nine months of last year. A merger between the two will effectively hide xAI’s high spending inside a much larger cash-flow shell — the logic is highly similar to how the giants use cash to prop up OpenAI’s financing chain. Risk Warning and Disclaimer The market has risks; investments must be made cautiously. This article does not constitute personal investment advice, nor does it take into account individual users' specific investment objectives, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article are appropriate to their individual circumstances. Any investment made accordingly is at one’s own risk.