About one month in the past, when the Magazine 7 shares had been screaming greater each day with out a care on the planet, and earlier than the plenty had even thought-about who would fund the trillions in future capex wants as soon as the natural money move topped out – one thing we had simply mentioned in “AI Is Now A Debt Bubble Too, Quietly Surpassing All Banks To Grow to be The Largest Sector In The Market” by which we defined why consideration would very quickly flip to AI corporations issuing gargantuan quantities of debt (one thing we first mentioned in July, lengthy earlier than anybody was contemplating this subject) as has now turn into the case – we determined to maneuver even additional past the curve and mentioned that not even the debt could be the gating issue for the AI revolution-cum-arms race, however slightly entry to vitality. That is as a result of in some unspecified time in the future – someplace across the time corporations realized they’d now not be capable of depend on both fairness or debt capital markets – the US authorities itself, if it wished to win the AI battle with China the place the state immediately subsidizes native knowledge facilities and AI figures, must step in and supply the required capital.
Particularly, we mentioned that “The cash will not be the issue: AI is the brand new world arms race, and capex will finally be funded by governments (US and China). If you wish to know why gold/silver/bitcoin is hovering, it is the “debasement” to fund the AI arms race.”
The cash will not be the issue: AI is the brand new world arms race, and capex will finally be funded by governments (US and China). If you wish to know why gold/silver/bitcoin is hovering, it is the “debasement” to fund the AI arms race.
However you may’t print vitality https://t.co/qwdD8QbVON
— zerohedge (@zerohedge) October 14, 2025
Even Elon Musk determined to answer that specific statement.
And because it had turn into the norm, we thought it will take the market the standard 6-9 months to catch as much as what we – and our readers – had been already contemplating, particularly since there nonetheless was ample “dry powder” capital among the many hyperscalers to delay the slightly disagreeable dialog of who would fund what as soon as the cash was gone, or so we thought.
As a result of this time it took lower than a month.
What occurred, because the market discovered the exhausting manner this week, is that OpenAI’s CFO Sarah Friar, with all of the finesse of a bull in a China knowledge heart, slammed the rising market skepticism that AI would treatment most cancers, slice bread and result in common utopia, and mentioned “I don’t assume there’s sufficient exuberance about AI, once I take into consideration the precise sensible implications and what it may possibly do for people.”
Her feedback got here in response to a podcast by which her boss Sam Altman participated, and the place he was grotesquely – in a Jeff Skilling form of manner – defensive when billionaire Brad Gerstner requested how an organization with $13BN in income can afford $1.4T in commitments. Altman’s reply? “If you wish to promote your shares, I’ll discover you a purchaser.”
🚨 Brad Gerstner, an OpenAI investor, asks Sam Altman how an organization with $13B in income can afford $1.4T in commitments. Altman’s reply? “Glad to discover a purchaser in your shares.” Translation: No reply. Very regarding. 🚩 pic.twitter.com/9jJKGw9QbF
— WallStreetPro (@wallstreetpro) November 2, 2025
Gerstner didn’t need to promote his shares – at the least not but – however the truth that Altman didn’t have a transparent reply (that must come a number of days later in an Invoice Ackman-size tweet), and as an alternative responded by attacking what could be thought-about a really rational query, whereas refusing or being unable to present a transparent reply.
Nonetheless, what Friar did say – and what promptly spooked the market on Wednesday – is a mangled clarification of the place the $1+ trillion in required funding would come from, saying OpenAI is “in search of an ecosystem of banks [and] non-public fairness” to assist its bold plans. However what triggered the promoting is when she explicitly mentioned that the US authorities must “backstop the assure that permits the financing to occur.”
In different phrases, when all the opposite sources of funds dried up – clearly a situation the corporate is contemplating judging by her response – the corporate must come to the US taxpayer.
She additional defined that “Federal mortgage ensures would actually drop the price of the financing,” enabling OpenAI and its buyers to borrow more cash at decrease charges to fulfill the corporate’s bold targets. Proper… as a result of there may be nothing like an organization with $14BN in income, $1 trillion in “valuation” and $1.4 trillion in commitments, than loading as much as the gills with government-backstopped debt. See, if solely Enron and Lehman may do the identical, each would nonetheless be round…
Her feedback from Wednesday afternoon instantly spooked the market and NVDA shares suffered their largest weekly drop since April.
And the explanation for the drop is exactly the truth that OpenAI was clearly contemplating what it will do when the cash to fund the trillions in spending – first money from operations, then debt, then fairness – and round offers dried up, the capital that had lifted NVDA to a $5 trillion market cap and OpenAI reportedly price round $1 trillion forward of its looming IPO (which can come simply because the AI bubble actually peaks).
The truth that US taxpayers had been principally the supply of that cash, is just a little fact the market wasn’t learn to listen to simply but…. a fact which we laid out clearly one month ago.
The response – each out there and throughout the heretofore complacent narrative surrounding the AI bubble – set off hearth alarms, and prompted Sam Altman to publish his longest but publish (clocking in at virtually 1100 phrases), by which he meant to “make clear just a few factor”, particularly that Friar had “misspoken” and that the ChatGPT maker was not looking for a bailout for its infrastructure commitments, and opposite to what his CFO talked about, he “doesn’t have or need authorities ensures.”
Solely, he does… however do not name it a assure, or bailout.
You see, Friar’s remark was a fastidiously planted trial balloon, one meant to not solely gauge the market’s response to what’s clearly coming, but in addition to plant the seed of expectation that someday, Sam Altman would crawl to the White Home, inform Trump that OpenAI is now too large to fail as it will take down not solely the market however about 20% of GDP progress (which is roughly what datacenter development accounts for nowadays), and demand a bailout, solely after all it would not be known as that.
Issues received worse when Trump’s tech/AI advisor David Sacks mentioned “There Will Be No Federal Bailout For AI… If One Fails, Others Will Take Its Place” refusing to let what had by now turn into the most important and most uncomfortable market narrative (i.e., why does the corporate on the forefront of the AI revolution want authorities ensures, or a bailout), depart the entrance web page. After which it received even worse, when it emerged that Sam Altman was – as soon as once more (simply ask Elon Musk) – mendacity, after it was revealed that on Oct 27, OpenAI’s Chief International Affairs Officer Chris Lehane, had submitted a doc by which they advocated for together with datacenter spend throughout the “American manufacturing” umbrella.
As Bloomberg defined, opposite to Sam Altman’s illustration that he desires nothing to do with the federal government, OpenAI had actually requested the Trump administration to revamp a Chips Act tax credit score to assist decrease the price of synthetic intelligence infrastructure, because the startup was exploring extra methods the US authorities can assist an industrywide knowledge heart build-out for AI.
Within the letter, Lehane suggests the administration work with Congress to increase a 35% chips-focused tax credit score to AI knowledge facilities, AI server producers and electrical grid elements, corresponding to transformers and the specialised metal used to provide them.
Broadening the tax credit score will “decrease the efficient value of capital, de-risk early funding and unlock non-public capital to assist alleviate bottlenecks and speed up the AI construct within the US,” Lehane mentioned within the letter.
Caught up on this newest internet of round lies (what is it about OpenAI and circles), which is immediately existential to the viability of the circle-jerk advancedTM Altman needed to publish one more “explainer” right this moment to debate simply how he sees his relationship with the federal government, now that this very sensitive subject was all anybody may discuss… to not point out was hammering NVDA inventory which has lengthy been the barometer of sentiment towards the AI bubble.
The federal government has performed a job in crucial infrastructure builds. Our public submission (posted on our weblog) shares our pondering and suggests concepts for a way the US authorities can assist home provide chain/manufacturing.
That is very according to every part we have now heard… https://t.co/1kAyLKtK6a
— Sam Altman (@sama) November 7, 2025
In its letter, OpenAI advocated for the federal government to subject grants, cost-sharing agreements, loans, or mortgage ensures to “producers” within the AI business broadly, with out specifying precisely which sorts of corporations. It’s clear that OpenAI could be one of many beneficiaries since it’s on the heart of your entire AI circle-jerk advancedTM.
Altman mentioned an effort to revitalize the US chip business “throughout your entire stack — fabs, generators, transformers, metal, and far more — will assist everybody in our business, and different industries (together with us).”
“To the diploma the federal government desires to do one thing to assist guarantee a home provide chain, nice.” Altman wrote. “However that’s tremendous totally different than mortgage ensures to OpenAI, and we hope that’s clear.”
Sure, it is “tremendous totally different”, as a result of what Sam is asking for is subsidies, which is exactly what China is bestowing upon its corporations. The one distinction is that in China all corporations are successfully state owned. In the meantime OpenAI hopes to someday turn into Zorg Industries and management everybody, together with nation states.
And right here we return to sq. one – particularly what we mentioned a month in the past is the rising AI arms race between the US and China, one which OpenAI quietly hoped to piggy again on and supercharge its returns and fairness worth. OpenAI mentioned the kind of monetary assist it’s asking from the federal government, would assist counter China in situations the place it’s “distorting the market,” corresponding to copper, aluminum and electrical metal. Direct funding would additionally assist shorten lead instances for crucial grid elements corresponding to transformers.
In a separate September white paper on infrastructure coverage, OpenAI really got here a lot nearer to admitting it does actually need express authorities ensures, in that it helps mortgage ensures to permit AI corporations to “confidently buy US-made chips at scale.” The transfer would shore up demand for US semiconductor services whereas decreasing prices for AI corporations buying chips, the white paper mentioned.
Which it to not say OpenAI hasn’t carried out its homework: the US has a prototype for loans and mortgage ensures for strategic industries, because it supplied these incentives to the semiconductor business as a part of the Chips Act. As of the tip of January this 12 months, solely $5.5 billion of as much as $75 billion had been awarded, per a Commerce Division report.
OpenAI’s requested tax credit score aligns with the Trump administration’s constant messaging about profitable the AI race and its high-level dedication to remake the Chips Act of 2022. Earlier this 12 months, it transformed a Chips Act grant in Intel Corp. into an fairness stake, marking a major departure from the unique plan.
However this is the factor: positive, go forward and demand – sorry, politely ask for – authorities ensures, backstops, or bailouts – no matter you need to name it – however be ready to compensate the federal government by handing over a large chunk of fairness so that everybody can take part within the upside, and never simply be caught with the hovering electrical energy and water payments that are wanted to fund the explosion of knowledge facilities throughout the nation.
It occurred with Intel, which gave up a serious fairness test to US taxpayers in return for US authorities assist, it occurred to uncommon earth minerals firm MP Supplies, and all different corporations the US has immediately invested in as a part of Trump’s new industrial coverage. To make sure, all these corporations which the Chinese language authorities is immediately subsidizing, none of them are actually non-public enterprises! This will likely come as a shock to Sam, however China is a communist nation, which explains the far higher generosity to have interaction in collective funding on behalf of the state.
Which is why, in our response to Sam, we mentioned “It is not a mortgage assure. It is simply the federal government – ie taxpayers – onboarding the danger in your enlargement and progress of your fairness worth.”
Which then turned a query: “What do taxpayers get in return: Intel gave them an fairness stake. Will OpenAI do the identical? Or is it simply greater electrical energy costs”
It is not a mortgage assure. It is simply the federal government – ie taxpayers – onboarding the danger in your enlargement and progress of your fairness worth
What do taxpayers get in return: Intel gave them an fairness stake. Will OpenAI do the identical? Or is it simply greater electrical energy costs https://t.co/uFaGpxEgdM
— zerohedge (@zerohedge) November 7, 2025
Sam Altman already stole incalculable worth by working at an Elon Musk-funded non-profit for years – with all of the inherent advantages of such a corporation versus a standard Company – earlier than uprooting its company construction and remodeling it into a standard company, one by which he plans to have the most important chunk of possession. And now he’s doing it once more, solely this time he hopes to learn from taxpayer generosity by pretending it’s all for the higher American good with out handing over even one share to Uncle Sam.
Do not let him.
