MW Why OpenAI's big revenue target may be a stretch

By Britney Nguyen

One analyst worries OpenAI will have trouble reaching its financial goals - and even staying afloat - if conditions shift in the AI market

OpenAI is doing $10 billion in annual recurring revenue, and reportedly has ambitions to grow that number to $125 billion by 2029. But one analyst worries this could be hard to achieve as artificial-intelligence spending comes under increasing scrutiny.

The $10 billion includes sales of its ChatGPT enterprise offerings and access to its application-programming interface, an OpenAI spokesperson told CNBC on Monday. And it's almost double the $5.5 billion in ARR the AI startup calculated for all of the previous year. CNBC also reported on the $125 billion revenue target, citing an unnamed source and backing up a prior report from The Information.

A spokesperson for OpenAI confirmed to MarketWatch that the company reached $10 billion in ARR, but declined to comment on the 2029 revenue target.

At the current level of hype and spending on infrastructure and services to deploy AI, OpenAI's revenue target "is vaguely credible," Richard Windsor, founder of research firm Radio Free Mobile, said in a note on Wednesday. However, the company could end up a long way from that goal if investors change their minds about AI or amid a broader economic crisis, Windsor said.

See more: OpenAI could be worth trillions of dollars one day, these analysts say. Here's what that means for rivals.

"This correction is likely to be caused by the realisation that statistical-based systems like [large language models] have no understanding of causality and are incapable of reasoning, meaning that the world is not going to change overnight, but instead simply become much more productive," Windsor said.

The current boom of AI investments "is a substantial overbuilding of capacity," Windsor said, "which will result in prices falling and the business model of providing AI services not being as profitable as everyone seems to think."

In this case, Windsor said "medium-term forecasts" are "much too high," and will lead to a correction in valuation for OpenAI and its peers, and "a shake-up in the global pecking order in AI."

Even if he's proven wrong, Windsor had issues with OpenAI's business model, which he said is not profitable until the company "is a gigantic global corporation." In his view, a company that can't make money until it is much larger is "at great risk of going bankrupt the minute there is a disturbance in the market, such as a correction or global crisis."

In response to Windsor's concerns about a potential bankruptcy down the road, an OpenAI spokesperson said they thought the company's ability to reach $10 billion in ARR within 21/2 years "speaks for itself, and of course we have many of the leading investors in the world backing us."

Windsor said OpenAI's massive spending on running its services makes it worth less money since the costs come close to its revenue, "while everyone seems to think that this makes OpenAI worth more money." He calculated that OpenAI's cumulative revenues will be around $256 billion between now and 2029. If the company is indeed on track to $125 billion, "its expenses will be about the same," he said. When OpenAI reported $5.5 billion in ARR in 2024, it also expected a loss of $5 billion, partly due to the costs of running ChatGPT and its other offerings, according to an analysis by the New York Times.

On the other hand, companies supplying the infrastructure for OpenAI, such as chip maker Nvidia Corp. $(NVDA)$ and cloud-computing company CoreWeave Inc. (CRWV), "either directly or indirectly, are going to make out like drunken sailors."

Investments would be best made in the AI data-center suppliers, such as companies focused on inference at the edge and nuclear power, Windsor said, as they are the ones "that make money now, giving them the reserves to withstand any market fluctuations."

By 2029, OpenAI and its competitors, such as Anthropic and France's Mistral, "will not exist as independent companies as they will be acquired when they get into trouble," Windsor said.

Windsor's predictions for the AI startup are in contrast to some other views on Wall Street - a point he made himself - that OpenAI's valuation is only growing.

In April, OpenAI reached a $300 billion valuation after raising $40 billion in funding - a number that Melius Research analysts said could bloom into the trillions, in a note on Monday. The company has its sights on disrupting "huge markets like search, devices, cloud and [software as a service]," the analysts said, which are currently dominated by its larger rivals such as Google $(GOOGL)$ and Apple $(AAPL)$.

-Britney Nguyen

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June 12, 2025 08:37 ET (12:37 GMT)

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