The 'Bubble' Shadow Looms Over OpenAI's Data Centers [Tech Talk]

OpenAI Announces $1 Trillion Investment Plan Over Past Two Weeks
Some Deals Are Merely 'Circular Transactions' on Paper
"Profit Is Needed for Justification"... Bubble Concerns Arise

OpenAI, the American artificial intelligence (AI) startup, has recently signed massive data center investment agreements with major big tech companies over the past two weeks. The stock prices of tech firms that entered into partnerships with OpenAI have all surged. However, there are growing warnings in the market about the risk of an AI bubble. Some point out that OpenAI’s fundraising methods for building data centers are reminiscent of a bubble economy.

OpenAI Bets $1 Trillion on AI Data Centers

According to foreign media outlets such as the Financial Times (FT), OpenAI’s investment in building data centers is estimated at around $1 trillion. In terms of power, the planned capacity is 20 gigawatts (GW), which is much larger than Singapore’s total power generation capacity of 13GW as of 2023. OpenAI is expected to deploy at least several million high-performance graphics processing units (GPUs). OpenAI’s first AI data center is already operational in Abilene, Texas, and additional centers are planned for New Mexico, Ohio, and other locations.

OpenAI's massive data center located in Memphis, Texas, USA. OpenAI

All the companies listed as OpenAI’s partners are among the largest big tech firms in the United States. Previously, Oracle agreed to build OpenAI’s data centers through a $300 billion investment, and Nvidia committed $100 billion to supply GPUs. On October 6 (local time), OpenAI also signed a partnership with AMD to introduce Instinct GPUs with a total capacity of 6GW. Furthermore, OpenAI secured the right to acquire up to a 10% equity stake in AMD in the future.

"Revenue Is Needed to Justify Soaring Stock Prices"

Trillion-dollar investments in data centers have long been part of the business strategy envisioned by Sam Altman, CEO of OpenAI. In February last year, the Wall Street Journal (WSJ) quoted an internal source at OpenAI as saying, "Sam Altman is seeking to raise $5 to $7 trillion in investments." In August, CEO Altman stated at a press conference, "Soon, OpenAI will invest trillions of dollars in infrastructure," adding, "Economists may call it crazy, but we are simply doing our job."

However, there are also concerns that OpenAI could overheat investment sentiment in the AI industry. It is necessary to examine how OpenAI structured its agreements with each company to secure the $1 trillion in investments.

Looking at Oracle’s $300 billion contract, Oracle will build data centers over the next five years using its existing equipment, and OpenAI will acquire these centers and pay the amount afterward. If OpenAI fails to make consistent payments for the acquisition over the next five years, Oracle will be left to shoulder the entire cost of building the data center facilities. This could negatively impact Oracle’s financial performance and increase the risk of a decline in its stock price. The IT media outlet The Information pointed out on October 7 that Oracle’s gross profit margin for its GPU server rental business is only 14%, significantly lower than its overall gross profit margin of 69.7%. On the same day, Oracle’s stock price plunged by 5.1% during trading due to concerns of overvaluation.

Sam Altman, CEO of OpenAI, who entered through Seoul Gimpo Business Aviation Center (SGBAC) in Gangseo-gu, Seoul on the 1st. Photo by Yonhap News

The deal with Nvidia appears similarly risky. Nvidia will first invest $100 billion in OpenAI, and OpenAI will use this amount to purchase GPUs from Nvidia. In an article published on October 7, FT described this arrangement as "essentially a circular transaction where money only moves between the two companies." The report noted, "For the current surge in stock prices to be justified, investment returns must be generated. The problem is that there is no profit yet, and there may not be any in the future."

Will the AI Bubble Become a Positive Bubble?

What conditions are necessary for OpenAI’s $1 trillion investment not to end as a bubble? George Hammond, a U.S. venture capital (VC) analyst, explained, "Demand for AI services must surge as much as OpenAI anticipates. If AI demand increases, the current stock prices can be justified, but if there are any signs of cooling demand, problems will arise."

CEO Altman has also acknowledged that OpenAI is fueling the AI bubble. In an interview with the foreign tech media outlet The Verge in August, he admitted, "I think AI is in a bubble," but argued, "If you look back at history, whenever a very important technology like the internet emerged, there was always a bubble." He added, "It is true that current AI investors are overly excited, but it is also true that AI is an equally important technology. (The AI bubble) will bring great benefits to the overall economy."

CEO Altman is not the only one viewing the AI bubble positively. Jeff Bezos, founder of Amazon, also emphasized during his speech at 'Italian Tech Week 2025' in Turin, Italy, on October 3, "AI is a kind of industrial bubble," adding, "A bubble is not a bad thing. In fact, it could benefit society as a whole. Once the real winners are determined, the entire world will reap the benefits."