Why are technology giants investing huge sums of money in OpenAI?

# Source: Wall Street Insights

By Long Yue

NVIDIA, Amazon and other tech giants have successively participated in OpenAI's $100 billion financing round. Analysts believe that OpenAI has become the lifeline of tech giants' valuations; a failure to keep capital flowing into the company could trigger a collapse of the AI investment narrative, potentially wiping out 50% to 80% of the tech giants' market capitalization. "If OpenAI cuts its committed spending with hyperscale cloud providers, they stand to lose $1 trillion in market cap—so what is $10 billion between friends?"

This so-called $100 billion financing round is, in essence, a self-rescue capital injection by tech giants to prevent the AI bubble from bursting.

On February 4, Ken Brown, a senior reporter at The Information, reported that OpenAI is raising a whopping $100 billion in funding. NVIDIA is said to plan to invest $30 billion, Amazon $20 billion, SoftBank $30 billion, and Microsoft is also set to chip in $10 billion.

Against the backdrop of OpenAI's staggering $730 billion valuation, the logic behind these savvy players scrambling to pour money in is straightforward, in Brown's view.

## Banks Have Lost Faith in OpenAI—Giants Have to Step In Themselves

OpenAI once adopted a shrewd strategy: instead of taking on debt itself, it had partners including Oracle, CoreWeave and Vantage Data Centers borrow money to build data centers using their own balance sheets, with OpenAI committed to making contract payments in the future.

In effect, OpenAI painted a promising picture, and its partners used that vision to secure bank loans. This strategy, however, is now facing intense market headwinds. Ken Brown pointed out:

"Investors have made it clear that the amount of credit they are willing to extend to companies relying on OpenAI for future payments is limited."

Bond market investors have now woken up to the reality. They realize that OpenAI is burning through cash at an unsustainable rate and will simply be unable to cover its future data center costs. Consequently, investors have driven up the financing costs for companies like Oracle, even treating their bonds as junk debt.

They recognize that if OpenAI's future cash flow fails to cover these debts, its partners—the ones building the infrastructure—will face the risk of default. As the report put it:

"This strategy may no longer be viable, or it may become extremely costly."

The ironic reality now is that Oracle has even been forced to announce a stock offering to raise funds, sending market anxiety to new heights. Mike Talaga, Head of Credit Research at Janus Henderson, stated bluntly:

"The market was shocked to see Oracle willing to dilute its equity to raise capital."

As Wall Street Insights reported yesterday, Wall Street banks are stretched to the limit on their balance sheets amid Oracle's massive financing needs for AI infrastructure. To reduce their exposure and free up capacity for further lending, banks are rushing to securitize and offload tens of billions of dollars in loans tied to Oracle's data center projects to insurance companies and private credit funds after securing ratings for these securities.

When banks stop lending to OpenAI's infrastructure partners, construction on OpenAI's data centers will grind to a halt.

## So Why Are Tech Giants Willing to Be the Backstops?

As external financing channels tighten, tech giants can no longer stand on the sidelines. If data center construction stops, OpenAI will be unable to train its models; without model training, it will have no need for NVIDIA's chips or Microsoft's cloud services.

This $100 billion financing round has thus become a **circular funding arrangement**:

- Microsoft's investment is to protect its $250 billion Azure cloud services contract. Microsoft holds approximately a 27% stake in OpenAI's Public Benefit Corporation (PBC), and OpenAI has committed to purchasing around $250 billion worth of Azure services.

- Amazon's capital injection is essentially a bid for more cloud business, locking in its $38 billion cloud services contract with OpenAI.

- NVIDIA's investment is to ensure OpenAI has the cash to buy its GPUs in return—a tactic to lock in growth and fend off competition.

This is a classic case of "lending you money so you can buy my products".

Second, injecting cash into OpenAI is about reassuring creditors across its supply chain.

With capital from tech giants, OpenAI gains certainty in its ability to meet payment obligations, preventing bond market investors from further driving up the cost of supply chain financing. For OpenAI, this buys a window of time: time for its revenue and profits to grow to a level where it can fund itself, or at the very least, to reopen market financing channels.

Third, tech giants are offloading their capital expenditure pressures into "investments", avoiding uglier financial statements and thus stabilizing their share prices.

Ken Brown emphasized a practical benefit of the giants' direct investment in OpenAI: the funds do not count toward their own capital expenditures, nor do they need to be raised through additional debt (at least for now). At a time when the market is closely scrutinizing AI-related capital spending, this difference in accounting and financing treatment can significantly ease short-term valuation pressures.

## A Musical Chairs Game No One Can Afford to Lose

Why can't OpenAI be allowed to fail? Because the systemic risks are simply too great.

A large portion of current tech giant valuations comes from an **AI premium**. If OpenAI collapses due to a lack of cash to cover electricity bills and chip purchases, the entire AI investment narrative will crumble. Mark Montgomery, founder of The Market, described it as a game of musical chairs:

"Unless Sam Altman can find more capital to keep the balloon inflated, a collapse could see big tech companies lose 50% to 80% of their market capitalization."

To put it plainly, the tech giants do not believe OpenAI is actually worth $730 billion. Rather, they know that if they do not spend $100 billion to keep the peace, the loss in their own market cap will be ten times that amount.

Panos Papadopoulos, a partner at Marathon Venture Capital, commented: "If OpenAI cuts its committed spending with hyperscale cloud providers, they stand to lose $1 trillion in market cap—so what is $10 billion between friends?"

This same "financing dance" is also playing out in Elon Musk's deals.

The article noted that SpaceX generated approximately $8 billion in EBITDA in 2025, while xAI burned through around $9.5 billion in the first nine months of last year. A merger of the two companies would hide xAI's massive cash burn within SpaceX's larger cash flow envelope—a logic highly analogous to the tech giants using their cash to prop up OpenAI's financing chain.

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