'Backstop'

As the projected capital expenditures to provide computing power for OpenAI and other generative AI companies continue to balloon, skeptics have begun to ask a simple but important question at increasingly louder volumes: how is this even possible?

When investor Brad Gerstner asked Altman that question last week on his Bg2 Pod ("How can a company with $13 billion in revenues make $1.4 trillion of commitments?"), Sam responded "First of all, we're doing well more revenue than that. Second of all, Brad, if you want to sell your shares, I'll find you a buyer. Enough."

For those of us who've been around the markets for a few years, it was reminiscent of Enron CEO Jeff Skilling calling Wall Street analyst Richard Grubman an asshole (during a public earnings call) after he dared to ask why Enron didn't produce a balance sheet or cash flow statement.

OpenAI CFO Sarah Friar poured some gasoline on the fire a few days later when she said in a WSJ Tech Live discussion about the same topic that the U.S. government could "backstop the guarantee that allows the financing to happen."

Friar later "clarified" her remarks with a LinkedIn post in which she said she "muddied" the picture with her unfortunate choice of words.

From Altman's response to the firestorm of criticism on Twitter: he denied OpenAI was asking for federal guarantees on its debt, but then suggested the government should build and own its own AI infrastructure, provide guarantees, and/or offer “credit enhancement” for semiconductor manufacturing.

Neither Altman nor Friar has been able to answer the basic question of how a company of OpenAI's size can possibly fulfill these commitments (which grew $38 billion larger after this week's Amazon / AWS deal was announced). And Sam does have a track record of, to put it mildly, reversing course - OpenAI started out as a non-profit in 2015 before it was converted, effectively and controversially, into a "capped profit" company in 2019 and more recently into an uncapped profit company (but a Public Benefit Corporation!). Oh and there was that whole thing in 2023 when the OpenAI board temporarily ousted Altman over credible allegations that he had misled the board on multiple occasions.

Add up all of the trillions of dollars and the comments from OpenAI's CFO and CEO, and it seems to us at Zeitgeist HQ like Friar's backstop comment was more of a Freudian slip than a simple case of accidentally choosing the "wrong" word.