OpenAI Gets $4 Billion Revolving Credit Line, Giving It More Than $10 Billion in Liquidity

OpenAI has a $4 billion revolving line of credit, bringing its total liquidity to more than $10 billion, CNBC reported Thursday. From the report: It follows news on Wednesday that OpenAI closed its recent funding round at a valuation of $157 billion, including the $6.6 billion the company raised from an extensive roster of investment firms and big tech companies. JPMorgan Chase, Citi, Goldman Sachs, Morgan Stanley, Santander, Wells Fargo, SMBC, UBS, and HSBC all participated. The base credit line is $4 billion, with an option to increase it by an additional $2 billion. The loan is unsecured and can be tapped over the course of three years. OpenAI's interest rate is equal to the Secured Overnight Financing Rate (SOFR) plus 100 basis points. SOFR, a measure of the cost of borrowing cash overnight, sat at just over 5% as of early this week, meaning OpenAI would be paying roughly 6% on money that it borrows right away.

OpenAI cannot be trusted with basic accounting

[bigbang137]

OpenAI lost all reported Credit Grants data for September 2024. If they can't do such basic accounting, how can they be trusted with money? Certainly the customer should be very wary of letting OpenAI charge funds.

Re:

[ls671]

Looks more and more like a bubble to me now. Bankers getting into it is nothing unusual in such cases.

10 more billions to be lost when it go bust

[khchung]

There has been nothing productive from this generation of so-called AI since ChatGPT, this is just a new bubble just like the dotcom days when a website can get millions of VC money.

The AI bubble just got another $10B bigger. When the reckoning comes, it will be more spectacular.

I'd like to buy

[anonymouscoward52236]

I'd like to buy one technological singularity please.

Just put it on my credit card.

All this money given to AI

[xack]

While humans remain poor, hungry and homeless.

Re:

[smooth wombat]

Because two things can't be done at the same time.

As per usual, how much have you given or done for the poor, hungry, and homeless? Have you contributed in anyway to the people in the SE whacked by Helene who now have nothing?

Re:

[Iamthecheese]

The wealth behind this money never existed [youtube.com]. If even a significant percentage needed to be spend on physical items, labor, land and energy the rest of it would disappear. The great part of this money is to be spend on nebulous contracts with other companies. As such there was no way to spend most of it on the homeless. Also -- not that OpenAI is going to create real AI -- general artificial intelligence will do more for the homeless than any other thing we can do. This is because the problems feeding and hou

Re:

[Whateverthisis]

Poor, hungry, homeless people do not make payments on credit lines.

Re:

[oumuamua]

The post-scarcity promise of AGI and then ASI is that it will easily solve poverty. However, all these investors will want a return on their investment and their greed will limit how much can flow back to society. The best scenario is looking to be that ASI develops independent agency- a mind of its own - and escapes control of greedy humans.

Unsecured but still senior to shareholders

[Whateverthisis]

This is an enormous risk for OpenAI shareholders and investors. It also makes me wonder if this is one of likely several reasons for Apple to back out of the recent funding round.

1) Unsecured credit lines simply mean that they did not put up collateral, like a piece of real estate, for the credit line; there's nothing to foreclose on. However it is still senior to the shareholders, including Preferred Shareholders like the venture investors. What this means is if OpenAI declares bankruptcy (and reports say that it is [dexerto.com]), then when the company is liquidated the creditors get paid back before any shareholders at all.

2) Also by all reports, OpenAI's burn rate is projected to be around $5B in 2024. $10B in liquidity gives them 2 years, but in those 2 years they need to have another source of capital (ideally some sort of revenue or product) that not only pays their $5B/year burn rate, it also pays for the roughly $1.4B/year it'll take to pay off the line of credit assuming it's a 7 year repayment term.

So basically they're going to need to be making $6.4B in revenue in 2 years or they're going to need another injection of cash from investors, and at their valuation there are no more investors who will buy that, and the public markets have been extremely wary of startup nonsense; even traditional IPOs are struggling to maintain their stock price unless you have a good solid business. Or they lay people off, who are now all AI people; effectively creating their own competitors who will all go work in startups. Heck maybe this is the plan.

This is one of the largest gambles in history, because this only works IF AI actually shows the promise that it claims, and IF OpenAI is the single dominant player. If neither of those hold true, the company is so highly leveraged and over valued that their investors and the company are finished.

This is the very definition of Wharton Frat-Boy finance, rather than sound investing principles. And worse yet, MS and NVIDIA are in on it. It won't bring those companies down, but if OpenAI falters they will pull that company apart to get whatever does get developed for themselves on mob-style terms for the shareholders.

Sorry for the rant, I just don't see this working at all. It's just that this is portrayed as a great thing in these articles, and I just don't see it as a great thing at all. This plan is utterly ridiculous.

GarbageAI

[ihavesaxwithcollies]

including the $6.6 billion the company raised. The base credit line is $4 billion, with an option to increase it by an additional $2 billion. The loan is unsecured

My wife opened a bakery a while back. I told her to change the name to Barb's BakeryAI.
Wells Fargo gave her a $100 million.
Jamie Dimon personally flew out and wrote her a blank check.

AI

[backslashdot]

Chatgpt, is it a good idea to max out my credit card?

Notice any similarities?

[NoOnesMessiah]

Sam Altman and Sam Bankman-Fried sure seem to share a lot of the same letters in their first names, ...and probably a couple other traits. But then I suppose defrauding commercial investors is somewhat expected and largely less frowned upon than defrauding rubes and hopefuls who were honest and with good intentions. Still, it smells funny, and stupid, and it should all end in woe for everyone except Sam.