What OpenAI’s $110 billion funding round says about the AI bubble

For years now, pundits and politicians have been predicting that the apparent AI bubble would soon burst.

Companies have poured hundreds of billions of dollars into snazzy new data centers and absurdly well compensated research teams in hopes of building powerful, wildly profitable AI models.

That’s despite the fact that even the most innovative AI companies still have modest revenues. OpenAI earned just $20 billion in 2025—less than the struggling Ross department stores make selling clothes, and about the same as Frito-Lay earns peddling potato chips.

Given those earning realities, the current absurd level of investment feels unsustainable. But if OpenAI’s massive new funding round is any indication, the AI bubble isn’t going to burst. At least, not yet.

Billions Upon Billions

In late February, OpenAI announced that it had raised $110 billion to continue building its world-leading frontier models.

The deal values OpenAI at between $730 and $840 billion. And perhaps more importantly, the round was led by massive companies and institutional investors, lending that valuation some real credibility.

Amazon reportedly chipped in $50 billion, NVIDIA contributed $30 billion, and SoftBank matched NVIDIA’s contribution. In turn, OpenAI agreed to use Amazon’s cloud infrastructure for some of its products, and secured access to more cutting-edge AI chips from NVIDIA.

OpenAI said the deal would allow it to scale “AI for everyone” while also funneling more capital into its nonprofit OpenAI Foundation.

The deal is especially notable because OpenAI is still a private company. Back in the olden days (which in Silicon Valley means “a decade ago”), companies had to go public to raise these kinds of funds.

Now, companies like OpenAI and Elon Musk’s newly merged xAI/SpaceX can push $1 trillion valuations without needing to involve pesky public market investors, or accept the scrutiny that doing an IPO brings.

Of course, OpenAI could always go public later—as many expect it to eventually do—and likely raise hundreds of billions more.

What Bubble?

OpenAI’s massive influx of cash is also notable because some industry experts thought it might never happen.

NVIDIA reportedly toyed with the idea of investing $100 billion into OpenAI all on its own, before seeming to get cold feet.

That pullback–coupled with OpenAI’s very weird governance structure—made some analysts nervous. 

Stansberry Research’s Whitney Tilson wrote about a month before OpenAI’s February round was announced that “…’seeking’ $100 billion is very different than ‘receiving’ $100 billion,” and predicted “When (not if) OpenAI fails to raise the money it seeks, that will be a key indicator the bubble is bursting—and it will be time to get out.”

Likewise, analyst and NYU professor Gary Marcus told Goldman Sachs that “current AI ventures aren’t generating enough profit to justify their lofty valuations. People are starting to get that message. And if enough people get that message on the same day, it will start to look like a bank run.”

They needn’t have worried. OpenAI seems to have had no trouble at all completing one of history’s biggest private funding rounds. 

And more investors–including tons of retail investors who would love something to invest in besides GameStop and Tesla–are almost certainly waiting in the wings.

All that suggests that fears of a funding failure—and subsequent popping of the AI bubble–were probably overblown. OpenAI now has plenty of cash to keep burning billions for months, at least.

The fact that OpenAI is continuing to pour money into building AI infrastructure also means that larger (and far richer) competitors like Google and Meta will be practically forced to do the same—or risk uncomfortable questions from their own investors.

The gravy train of AI money will thus continue to chug on, as the flywheel of AI funding shows no signs of slowing down.

Where it Ends

I’ll take a moment here to note that nothing in here is investment advice, and you shouldn’t trade based on anything in this article.

That’s especially true because despite the sunny picture painted by OpenAI’s gigantic raise, the fundamental business challenge facing generative AI remains unchanged.

Again, OpenAI’s revenue is paltry. Yes, it’s growing. But so is McDonald’s. 

As multiple analysts have pointed out, investors are happy to overlook that and throw wads of money at OpenAI and its ilk because they expect generative AI to take over the labor market, make humans obsolete, and usher in an era of transformative leisure in which we all swim in lakes while benignly intelligent supercomputers run the economy for us.

The moment that future shows signs of not appearing, though, investors like Amazon could decide to pull back and put their money into more practical things, like selling you toasters and ruining legacy filmmaking.

That moment didn’t happen this month. But it could still be just around the corner.

“AI is certainly in a financial bubble,” Marcus told Goldman Sachs. “Just as no one could predict the exact moment the Dutch Tulip Mania would end, it’s impossible to know when this bubble will burst—but it will burst.”