OpenAI doesn’t have the cash to pay Oracle $300 billion. Raising it will test the very limits of private markets.

There’s a playbook in Silicon Valley: raise some money; build something people want; raise a lot more money; burn it in the pursuit of growth. The core of this strategy is to swap money for time by acquiring talent, companies, infrastructure, and technologies, all in the pursuit of leapfrogging your competition in the burgeoning field you’re disrupting. Then, if you’re successful in ascending to the top: kick back, up your prices, and rake in the billions.

But no company has ever burned as much money as OpenAI is planning to.

In the last few weeks, major deals with Broadcom and Oracle have thrown into sharp relief just how insane OpenAI’s ambitions are. The Oracle deal alone is worth $300 billion over five years starting in 2027.

OpenAI does not have that kind of cash. In fact, four of the tech world’s big “cash incinerators” — Uber, Tesla, Snap, and Netflix — together burned a pathetic ~$42 billion during their respective heavily cash-burning periods.

Per The Information, OpenAI is planning on spending $115 billion through 2029. Given that the company raised “only” $40 billion earlier this year — and $64 billion in its lifetime to date, per Pitchbook data — it’s fair to assume that OpenAI will have to dip into the capital markets again to raise another $50 billion to $75 billion to fund its spending splurge.

Just a few years ago, the idea of raising that amount on the deeply liquid public markets would have been remarkable; the biggest IPO ever was 2014’s Alibaba, which raised $25 billion — a figure that might not cover even a single year of OpenAI’s peak cash burn. Doing it in private markets would have been near unthinkable.

The Takeaway

If the company pulls it off — raises all that money and finds a way to make the unit economics of its chatbot work along the way — it will raise a major question: is the stock market doing its primary job? If the most capital-hungry business of all time doesn’t need to raise on the public markets, we may need to rethink our textbook definitions of the stock market. The capital-allocating conduit that’s been the bedrock of American capitalism for more than a century is increasingly about price discovery, liquidity, and risk transfer, and less about capital formation.