OpenAI's CFO isn't sure the math works

THE MOST capital-intensive startup in history has a chief financial officer who isn't sure the math works. Sam Altman has committed OpenAI to spend more than $600 billion renting cloud servers over the next five years, and has privately told associates he wants the company public by the fourth quarter of this year. Sarah Friar, the former Goldman Sachs analyst hired to make all of this financially credible, has told colleagues she doesn't believe OpenAI will be ready in time — and isn't convinced the spending is justified.

The tension surfaced in reporting by The Information this week, revealing that Friar has been excluded from some conversations about financial plans, including a discussion on server spending with one of OpenAI's top investors. Her absence was, by one attendee's account, noticeable and awkward. In an unusual organizational move for a company of OpenAI's scale, Friar stopped reporting directly to Altman last August and instead began reporting to Fidji Simo, head of applications — who herself went on medical leave last week. The CFO of an $852 billion company now reports to a position that is temporarily vacant.

None of this has slowed the financial machinery. OpenAI closed a $122 billion funding round last week at an $852 billion valuation, the largest private raise in history. Amazon contributed $50 billion, with Nvidia and SoftBank putting in $30 billion apiece. The company says it now generates $2 billion in revenue per month and has 900 million weekly active users. By any conventional metric, the business is thriving.

Burn notice

But the conventional metrics are doing heavy lifting.OpenAI projects burning more than $200 billion before it starts generating positive cash flow, a figure that privately doubled from earlier estimates when investors were briefed in February. Gross margins came in lower than projected last year because the company had to purchase expensive compute at the last minute to meet surging demand — a problem that sounds like success until you notice the margin compression it creates. Revenue is growing at roughly 3x year-over-year, but the spending commitments are growing faster still, locked in years ahead through contracts that bear little resemblance to traditional cloud deals.