Scott Galloway, a bestselling author and NYU professor, has issued a dire warning about the potential collapse of OpenAI, suggesting that it could have far-reaching implications for the global market.
Galloway Sounds Alarm On OpenAI
Speaking on his Prof G Markets podcast, Galloway highlighted the precarious nature of the current market, which heavily relies on AI. He noted that since ChatGPT’s debut in late 2022, AI-related stocks have accounted for about 80% of the market's total gains.
Co-host Ed Elson highlighted "red flags" and cautioned that while OpenAI is bringing in roughly $13 billion in annual recurring revenue (ARR), its spending is more than twice that figure.
Galloway predicted that OpenAI will likely file for an IPO sometime in 2026 and then Altman would’nt be able to say “sell your shares,” in an earnings call as the OpenAI CEO recently said to an investor, Brad Gerstner who questioned his $1.4 trillion spending plan.
Scott Galloway further stated that the potential talks of a taxpayer bailout as evidence that the firm lacks a sustainable financing strategy and may be forced to turn to debt, a move he believes could mark the beginning of the end for the AI bubble.
Galloway warned that if the OpenAI narrative falls apart, the ensuing market downturn could be exceptionally severe.
"It's going to be ugly…there's going to be nowhere to hide,” he adds.
Altman’s Spending Plans Draw Scrutiny
Recently, OpenAI CFO Sarah Friar‘s remark ignited confusion about the company’s funding strategy, leading to speculation that the company was seeking a federal bailout. However, CEO Sam Altman quickly quashed these rumors, stating that OpenAI does not seek or want any kind of government guarantee to protect it from failure.
Altman had also defended the company’s $1.4 trillion investment in infrastructure, stating that OpenAI is bringing in far more revenue than the widely cited $13 billion annual estimate.
The company also reportedly plans to launch tailored AI products for governments and businesses, new shopping tools, and revenue streams from its Sora video service and AI agents. It's also exploring new debt financing to expand infrastructure and possibly supply computing power through its Stargate data center project.
Analysts Divided Over AI Bubble
CNBC’s Jim Cramer has warned that the company’s massive spending spree could test even the strongest bulls in the AI trade, indicating potential cracks in the company’s aggressive push to dominate the AI landscape.
However, after a $1 trillion wipeout in the Magnificent Seven's market value—half of it from Nvidia (NASDAQ:NVDA)—concerns of an AI bubble are mounting. However, Goldman Sachs analysts argue it's too early to compare the surge to the dot-com crash, saying today's market looks more like the early stages of the 1990s tech boom than its peak.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
