At a critical juncture when markets fear an AI bubble burst, capital from the United Arab Emirates (UAE) may emerge as a decisive stabilizing force.
Reports indicate that OpenAI is planning to raise up to $100 billion in funding, with expectations of securing investments from UAE sovereign wealth funds. Earlier, OpenAI had already received backing from UAE investment firm MGX. Analysts suggest that UAE sovereign wealth funds, including MGX, are poised to play a central role in this funding round.
Market observers argue that the UAE’s continued investment reflects a "Too Big To Fail" logic—extending from the 2008 financial crisis to today’s AI leaders—where capital must keep flowing to sustain the ecosystem.
For secondary market investors, this financing round carries implications far beyond OpenAI itself. It directly impacts the financial health of key suppliers like Oracle. Previously, concerns mounted over OpenAI’s ability to generate sufficient revenue to cover its massive computing infrastructure commitments to Oracle and CoreWeave. These fears led Barclays to downgrade Oracle’s debt rating, while its credit default swaps (CDS) surged to a 16-year high of around 156 basis points, with markets even pricing in bankruptcy risks over the next five years.
The new funding is expected to provide a significant boost to the supply chain. OpenAI’s capital will largely be allocated to computing costs, ensuring steady revenue streams for data center providers like Oracle. Following the news, Oracle’s stock rose over 5% in after-hours trading on Thursday.
**OpenAI Seeks Government Backing** OpenAI’s financing pressures began in late October when investor Brad Gerstner questioned how a company with just $13 billion in revenue could shoulder $1.4 trillion in debt. CEO Sam Altman sidestepped a direct response.
Days later, reports surfaced that OpenAI was exploring government guarantees to attract the colossal investments needed for AI computing infrastructure. The underlying message was alarming: without such guarantees, OpenAI might default on its $1.4 trillion commitments, signaling a potential collapse of the AI bubble.
Skepticism quickly spread to OpenAI’s partners. As analysts calculated the trillions in debt required for the AI boom, weaker-rated firms like CoreWeave and Oracle saw their bonds and stocks plummet, with CDS hitting record highs as bankruptcy risks soared.
**Middle East’s Strategic Bet** The UAE’s deepening involvement is reshaping the industry. OpenAI aims to bring UAE sovereign wealth funds on board as major investors, having already secured funding from MGX, a subsidiary of UAE-based G42.
Meanwhile, SoftBank CEO Masayoshi Son pledged $30 billion to OpenAI this year, selling $5.8 billion in Nvidia shares last month to free up capital. OpenAI expects the remaining $22.5 billion from SoftBank by year-end. Yet, against OpenAI’s projected $1.4 trillion capital needs over five years, current funding remains insufficient.
The impending $100 billion investment is altering the competitive landscape. OpenAI plans to use these funds to secure its position for the next two years and beyond, not only bolstering its odds in the AI race but also improving survival prospects for partners like Oracle and CoreWeave.
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