OpenAI Is Spending Billions To Stay Ahead In AI—But JPMorgan Warns This 'Vibe Spending' Could Push Investors To Their Limit
ChatGPT-parent OpenAI may be leading the AI arms race, but its spending habits are raising eyebrows on Wall Street.
What Happened: In a rare note covering a private company on Friday, JPMorgan Chase & Co. (NYSE:JPM) analysts Brenda Duverce and Lula Sheena cautioned that OpenAI's aggressive spending on talent and R&D—what they dubbed "vibe spending"—could test investors' patience, reported Business Insider.
According to the note, OpenAI is expected to burn $46 billion over the next four years. While the company has raised $57 billion in just two and a half years, the analysts said profitability may not arrive until 2029. Investor expectations will be "tested," they wrote.
One major cost driver: retaining top AI talent. Meta Platforms Inc.'s (NASDAQ:META) new superintelligence lab has already poached several researchers from OpenAI, reportedly offering compensation well over $100 million.
Seven of Meta's first 10 hires came directly from OpenAI.
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Still, JPMorgan sees major upside. The firm said OpenAI has a strong first-mover advantage, with its app surpassing 500 million weekly active users this spring—more than 70% of AI app downloads globally in markets where it competes.
The bank also cited India as a key growth market where OpenAI is already overtaking Alphabet Inc.'s (NASDAQ:GOOG) (NASDAQ:GOOGL) Google.
Additionally, OpenAI's $6.5 billion acquisition of Jony Ive's hardware startup could create a hardware-software "flywheel," driving revenue through devices and more profitable subscriptions.
Why It Matters: This marks the first time JPMorgan has analyzed a private tech firm like OpenAI, underscoring the company's growing influence.
However, the note also questions whether OpenAI's lead is sustainable. Having the "best AI model" is not a robust moat," the analysts warned, noting that model performance is converging across competitors.
Meanwhile, on Monday, it was reported that six months after its White House debut, the $500 billion Stargate project—a joint AI infrastructure venture between OpenAI and SoftBank Group (OTC:SFTBF) (OTC:SFTBY)—has stalled.
Despite promises of a $100 billion immediate investment, it has yet to secure a major data center deal and is now focusing on a smaller facility in Ohio.
As per the report, disagreements over structure, control and strategy between OpenAI and SoftBank have led to delays and scaled-back ambitions, with leadership tensions between Sam Altman and Masayoshi Son slowing progress.
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