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OpenAI is ordering hundreds of billions of dollars worth of chips in the artificial intelligence race, raising questions among investors about how the startup will finance these purchases.

In less than a month, the San Francisco startup behind ChatGPT has committed to acquiring a staggering 26 gigawatts of sophisticated data processors from Nvidia, AMD, and Broadcom — more than 10 million units that would consume power equivalent to 20 standard nuclear reactors.

“They will need hundreds of billions of dollars to live up to their obligations,” said Gil Luria, managing director at D.A. Davidson, a financial consulting firm.

The challenge is daunting: OpenAI doesn’t expect to be profitable until 2029 and is forecasting billions in losses this year, despite generating about $13 billion in revenue.

OpenAI declined to comment on its financing strategy.

However, in a CNBC interview, co-founder Greg Brockman acknowledged the difficulty of building sufficient computing infrastructure to handle the “avalanche of demand” for AI, noting that creative financing mechanisms will be necessary.

– Creative financing –

Nvidia, AMD, and Broadcom all declined to discuss specific deals with OpenAI.

Silicon Valley-based Nvidia has announced plans to invest up to $100 billion in OpenAI over several years to build the world’s largest AI infrastructure.

OpenAI would use those funds to buy chips from Nvidia in a game of “circular financing,” with Nvidia recouping its investment by taking a share in OpenAI, one of its biggest customers and the world’s hottest AI company.

AMD has taken a different approach, offering OpenAI options to acquire equity in AMD — a transaction considered unusual in financial circles and a sign that it is AMD that is seeking to seize some of OpenAI’s limelight with investors.

“It represents another unhealthy dynamic,” Luria said, suggesting the arrangement reveals AMD’s desperation to compete in a market dominated by Nvidia.

– Crash or soar? –

The stakes couldn’t be higher.

OpenAI co-founder and CEO Sam Altman “has the power to crash the global economy for a decade or take us all to the promised land,” Bernstein Research senior analyst Stacy Rasgon wrote in a note to investors this month.

“Right now, we don’t know which is in the cards.”

Even selling stakes in OpenAI at its current $500 billion valuation won’t cover the startup’s chip commitments, according to Luria, meaning the company will need to borrow money.

One possibility: using the chips themselves as collateral for loans.

Meanwhile, deep-pocketed competitors like Google and Meta can fund their AI efforts from massive profits generated by their online advertising businesses — a luxury OpenAI doesn’t have.

The unbridled spending has sparked concerns about a speculative bubble reminiscent of the late 1990s dot-com frenzy, which collapsed and wiped out massive investments.

However, some experts see key differences. “There is very real demand today for AI in a way that seems a little different than the boom in the 1990s,” said Josh Lerner, a Harvard Business School professor of investment banking.

CFRA analyst Angelo Zino pointed to OpenAI’s remarkable growth and more than 800 million ChatGPT users as evidence that a partnership approach to financing makes sense.

Still, Lerner acknowledges the uncertainty: “It’s a real dilemma. How does one balance this future potential with the speculative nature” of its investments today?

tu-gc/arp/ksb

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we’ll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, we’ve noticed some promising trends at WCE Holdings Berhad (KLSE:WCEHB) so let’s look a bit deeper.

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If you haven’t worked with ROCE before, it measures the ‘return’ (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on WCE Holdings Berhad is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)

0.012 = RM90m ÷ (RM8.2b – RM958m) (Based on the trailing twelve months to June 2025).

So, WCE Holdings Berhad has an ROCE of 1.2%. Ultimately, that’s a low return and it under-performs the Infrastructure industry average of 6.1%.

Check out our latest analysis for WCE Holdings Berhad

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of WCE Holdings Berhad.

Even though ROCE is still low in absolute terms, it’s good to see it’s heading in the right direction. Over the last five years, returns on capital employed have risen substantially to 1.2%. The company is effectively making more money per dollar of capital used, and it’s worth noting that the amount of capital has increased too, by 37%. So we’re very much inspired by what we’re seeing at WCE Holdings Berhad thanks to its ability to profitably reinvest capital.

All in all, it’s terrific to see that WCE Holdings Berhad is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 191% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

One more thing, we’ve spotted 2 warning signs facing WCE Holdings Berhad that you might find interesting.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.