OpenAI Shows Too Much Money Can Be a Real Thing

The record-setting US$40 billion funding round is indicative of just how much cash is flooding into AI—leading start-ups to chase all the wrong priorities.

- Gautam Mukunda

On March 31, OpenAI announced US$40 billion (S$53.7 billion) in new financing, the largest funding round in history, and one that nearly doubled the artificial intelligence company's valuation to US$300 billion. While no other start-up can match those eye-watering numbers, they probably shouldn't be a surprise given just how much capital is flooding into the technology: AI companies raised a record US$110 billion in venture capital funding in 2024.

That kind of money might seem like a boon for AI innovation. But it may become a burden instead. First, by depriving these firms of invaluable market signals. Second, by driving them to appeal to investors instead of customers.

The leading AI companies are extraordinarily unprofitable, even by historical "growth at all costs" standards. OpenAI's unprecedented ability to raise capital is critical for its continued functioning, as the company reportedly burned US$5 billion in 2024. It's not alone, as The Information reported that its competitor Anthropic burned US$5.6 billion that same year. By comparison, the largest-ever loss by Amazon, another start-up that initially prioritized growth, was US$1.4 billion in 2000, and it became consistently profitable three years later.

These losses are not just about R&D or capital investment. Most of OpenAI's users do not pay for the service, and each one costs the company money. An analysis by Mr Ed Zitron, perhaps the industry's most trenchant critic, found that OpenAI is likely losing money even on paying customers because of how expensive they are to serve (the best version of OpenAI's 03 model can use more than US$1,000 worth of computing power per query).