Artificial Intelligence - a bubble? pt.2
- Dobromir Risov
- 2 days ago
- 6 min read
By Dobromir Risov December 2025
Introduction to part 2
I wrote in part 1 about the history of Artificial Intelligence (Investments) and I reviewed Nvidia (Artificial Intelligence - a bubble? ). Today I write about - probably the "face" of AI to the public. This is the entity who came up with ChatGPT: Open AI. The outlook for today is: I first write about the history of Open AI. Then, in the main part I review the financial situation differentiating in a past, present and future. The data shared in the main part is used to answer the question recently raised in the news: is it a bubble?
About Open AI - general info
According to Wikipedia, Open AI is an “Artificial Intelligence organisation”. It is headquartered in California. Initially Open AI was a not for profit organisation. Amongst its founders was for example Elon Musk. Today, by the end of 2025, there is a for profit organisation called Open AI Group PBC and a parent organisation called Open AI Foundation. This entity is still not for profit. Open AI was founded in 2015. Sam Altman is the CEO. Open AI developed and offers the language learning model (LLM) ChatGPT. Open AI is a private entity, as a result it is more difficult to find first level information about its financials. I rely on using second hand sources – Yahoo Finance, Wikipedia and TechCrunch.
Main part
The financial present
According to Wikipedia Open AI lost in 2024 $ 5 billion. Since its foundation the entity has yet to report a profit. By October 2025, revenue of $ 13 billion was reported according to Tech Crunch. Open AI is a private entity. It is possible to buy its stock but it is more difficult to do so, than with say Nvidia stock. I found the chart at Yahoo Finance. Despite its loss making and huge capital requirements the stock´s valuation keeps going up, as you can see below.
A private stock & a meteoric price When I look at the stock chart, the rise is meteoric::since the beginning of 2024 the stock was quoted at around $ 20, at the end of 2025 the stock is at $ 723. It is during the funding stage in October 2025 that Open AI was valued at $ 500 billion. As mentioned in the beginning, Open AI made losses in 2024. When are profits going to follow suit with the meteoric valuation? Open AI survives financially with externally contributed funds known as Venture Capital as shown below.
The financial past
The table below is from Yahoo Finance. It shows a breakdown and a total in the financing rounds so far. The amounts are substantial. Open AI succeeded in raising almost $ 50 billion in funding since April 2023. This is some 2,5 years ago. How much of this is left
and for how long the funds will be sufficient is difficult to say as it depends on their planning. More on it in the next section. The financing stage in March 2025 with $ 40 billion was by far the most substantial one. The entity uses the funds to pay wages for 3000 employees and more importantly for IT infrastructure.
The financial future
According to TechCrunch, Open AI plans to spend $ 1 trillion during the next 10 years for computing infrastructure: Its product needs very powerful equipment. In accounting language this is capital expenditure (CapEx). Orders will be placed at Nvidia or AMD to name a few companies. It´s not possible to say what portion of that amount is a “must spend” and how much of it is “would like to spend”. Based on that data I prepare a forecast P&L. It consists of three items - revenue, depreciation and finance cost. Revenue is straight forward: I take the figure as provided in the TechCrunch article. For the depreciation charge there are calculations necessary.
Depreciation & Amortisation
I took the total CapEx and divided it by 10 (years). So I arrive at a yearly amount of $ 100 billion in CapEX. Second, I assumed a lifespan of 4 years for the equipment: that is after 4 years the equipment would be written off 100% in the ledgers. That gives a yearly estimated depreciation charge of $ 25 billion to the P&L.
Finance Cost
I further assumed a 4% cost on the yearly Capex: that equals $ 4 billion in annual finance cost. Now I can draw up an estimate P&L as shown to the left: I take into account revenue, depreciation and finance cost. P&L bottom line is a loss of $ 16 billion. There are some unknowns like an annual increase in revenue. Still I would say the forecast P&L gives some good impression of the future situation: it´s not a positive one. According to TechCrunch a cause for the difficult financial situation is solely 5% of those using Chat GPT are also willing to pay for it. One key to improving the P&L situation is to increase the number of paying customers. When they double the revenue, Open AI comes close to break even. That seems unrealistic at least in the next few years.
Summary & Conclusion
Open AI was founded some 10 years ago. From a financial perspective the entity was struggling in the past. Open AI is also loss making in the present. The future is very challenging too. So far Open AI has been running its business with outside funding. The sums raised are substantial. How much of the almost $ 50 billion in funding is left I cannot say. The forecast P&L is going to be wrong, as this is a characteristic of forecasts. Yet the forecast gives an accurate enough big picture of the financial situation. For those interested in forecasting, I wrote Forecasting Markets & Stocks.
Going back to the headline question. Is it a bubble? When a company made losses in the past and is expected to make losses in the future, that is one criteria for a bubble for me: it lacks business substance. Another criteria to meet is if the company is publicly traded? No, Open AI is private. For me a bubble would be a project or company with a) no business / financial substance, b) being available to the public for purchase and c) being very expensive to purchase. Of those three criteria, Open AI meets two. For me it is a project which lacks business substance for now. That can change.
When personal investors start investing by analysing and selecting stocks they must consider the time it takes. It is time consuming while you also work full time. That´s why I focus on two strategies beyond stock selection which take your limited time resources into account: Courses (List).
Sources
Wikipedia
Open AI has 5 years to turn $13 billion into $1 trillion (Tech Crunch)
Funding Table (Yahoo Finance)
Valuation Chart (Yahoo Finance)
Frequently Asked Questions (FAQs):
1. Is Open AI profitable? No. Open AI was founded in 2015 as a not for profit entity. Since then Open AI has become a for profit entity. It has yet to report a profit.
2. Is Open AI making a profit next year? This is not known. Based on currently available data, Open AI will record a loss.
3. How does Open AI operate when it is not profitable? Open AI recently received more external funding from its owners. Until now Open AI has almost received $ 50 billion in funding.
4. Why is Open AI valued at $ 500 billion when it is not profitable? Investors believe, the entity will become profitable in the future, albeit when is not known.
5. What are the causes for the incurred losses? Chat GPT is the core product of Open AI. Many people use the programme, yet only 5% have subscribed. Open AI´s revenue is made up of subscription fees. In addition to a low subscription base, the services offered require massive computing resources. These resources in turn are expensive. So revenue is too low and or costs are too high.
6. Can I buy stock in Open AI? Open AI is a privately owned company. That is, its shares cannot be bought and sold on a stock exchange. It is still possible but it is very difficult: very likely a private investor needs to buy larger quantities. So, in theory, yes, in practical terms – no.
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