OpenAI Wins Pentagon Work as Altman Tries to Square Circular Deals after Raising $110B

To make a mountain of moolah, you’ve got to raise a mountain of moolah to burn. That is how the saying goes, right?

On Friday, OpenAI announced a record-breaking $110 billion haul, lifting its valuation to $730 billion, more than double what it was a year ago. Participation from Nvidia and Amazon made it the latest so-called circular deal, in which money-losing artificial intelligence startups are financed by their own customers. Later the same day, OpenAI announced a deal with the US Department of Defense to provide AI services after a dispute between rival Anthropic and the Trump administration.

Under Pressure

OpenAI’s latest fundraising round follows a $30 billion raise by Anthropic, which was valued at $380 billion. Nvidia and Microsoft, another OpenAI investor, were among the participants. In January, Elon Musk’s xAI raised $20 billion, with Nvidia also in the round. All three AI startups, which have spent billions to scale, have a long way to go before making good on the upside for their hyperscaler investors. Some analysts, pointing to fears the stock market is overindexed on AI, have argued these deals could lead to intensified losses if the AI startups don’t deliver.

One option for raising more growth capital is a public offering, which OpenAI, Anthropic and xAI’s new parent, SpaceX, are all reportedly weighing. In fact, Amazon’s $50 billion investment in OpenAI’s new round encourages it: The money comes in tranches, with $15 billion up front and $35 billion “in the coming months” upon OpenAI meeting unspecified milestones or completing an IPO or a “direct listing of equity securities.” OpenAI CEO Sam Altman said he understands “where the concern comes from,” but the scale of the deals demonstrates they’re not circular:

“Revenue for us [and] for other companies in the industry is growing extremely quickly, and that’s how the whole thing works,” he told CNBC. “I don’t think it looks circular, even…

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