OpenAI’s Losses Surge to $21 Billion: Here’s What’s Keeping the AI Bubble Afloat

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OpenAI’s 2025 financials were just revealed, and they are ugly. Like “hide it from the kids” ugly. The company behind ChatGPT, a leading artificial intelligence (“AI”) chatbot, has been burning cash at a furious rate – a record $20.9 billion in operating losses in 2025, according to leaked documents examined by noted AI critic Ed Zitron and the Financial Times.

The leaked financials also reveal soaring revenue growth alongside those soaring losses. In 2025, OpenAI recorded nearly $13.1 billion in sales, growing some 250% year over year. However, its year-over-year operating loss widened by 138%.

Most investors knew that OpenAI was losing gobs of money, but the financials finally revealed the actual size of that loss. While you’ll see other, even bigger losses reported in the media, the number to focus on is the operating loss, since it avoids some of the accounting wonkiness from last year.

For example, OpenAI’s transition from a non-profit entity to a for-profit business hit profits by a $41.6 billion, due to changes in the fair value of convertible interest and warrant liability. But after accounting, OpenAI recorded “just” a $38.5 billion net loss attributable to the company.

Further accounting rules stipulated that much of the losses were attributable to non-controlling interests. But these accounting technicalities are not what will determine whether OpenAI will become a successful business. So, investors should focus on its core ability to turn a profit.

And on that front, it’s not looking great for OpenAI, with that sizable operating loss.

The leaked numbers for the first quarter of 2026 looked only slightly better, as OpenAI slashed spending on several projects, including its Sora text-to-video AI model. OpenAI recorded sales of $5.7 billion, along with an operating margin of negative 122%, implying a loss of nearly $7 billion.

So, while the operating margin may be declining – from about negative 160% in 2025 to just negative 122% in this year’s first quarter – the absolute loss is increasing at a robust pace. Annualizing the first quarter’s results implies an operating loss of nearly $28 billion. The loss only widens with sales growth.

At the end of 2025, OpenAI had a bit more than $50 billion in assets, with nearly half of that in cash, according to Zitron. So, the first-quarter loss consumed a large chunk of the remaining cash, though a massive capital raise in March put a further $122 billion into the company’s coffers.

Of course, the implications of OpenAI’s dire financials spread far beyond the company itself. Besides its 27% stake in OpenAI, Microsoft (MSFT) has received substantial revenue from the company, with OpenAI paying the software giant $17.2 billion in 2025. Meanwhile, a huge portion of chipmaker Cerebras Systems’ (CBRS) revenue depends on OpenAI staying solvent.

But the situation may be getting much worse for OpenAI and the AI industry as a whole.

AI Industry Braces for a Price War

The revelation of OpenAI’s 2025 losses comes amid a potential price war among generative AI companies. OpenAI is considering lowering the cost of the tokens that power its AI models, according to the Wall Street Journal. That’s in response to the company’s expectation that its key rival, Anthropic, is planning to do the same.

Given OpenAI’s already massive losses, a price war could be devastating, turning OpenAI into an even bigger money burner.

OpenAI is caught in a tough spot. The company is missing its own sales goals and failing to grow its customer counts fast enough. At the same time, it has an incredible $1.4 trillion in spending commitments over the next few years, including deals with Microsoft, Broadcom (AVGO), and Oracle (ORCL), among others, according to Barron’s.

So, OpenAI is considering lowering prices to peel away market share from Anthropic and others in a bid to meet its contractual spending. That’s a recipe for even further losses.

The news of a potential price war suggests that the situation in the AI industry is much bleaker than surging company valuations may indicate.

For OpenAI and Anthropic to consider lowering prices suggests the underlying dynamics are poor, despite the intense sales growth. Rational economic players try to avoid price wars because they hurt profitability for all companies, and AI simply can’t afford a further cash drain right now.

These companies have already been heavily subsidizing users, and potentially reducing the revenue they generate could put further pressure on their bottom line.

So, news of a potential price war suggests that the AI industry is not growing as fast as it needs to, at least if it wants to meet its spending commitments. It’s not the kind of industry dynamic that you expect to see when major players say they’re rushing to meet demand.

This level of cash burn can only be sustained if investors are willing to subsidize the growth, since the losses must be absorbed somewhere. If investors lose their appetite, these companies have few, if any, viable alternatives to survive.

For now, though, we’re seeing prices of AI-related stocks skyrocket, from private companies such as OpenAI and Anthropic to new IPOs such as SpaceX (SPCX). AI plays such as memory stocks continue to surge, and soaring prices look bubblelicious.

AI Investments Remain Red-Hot in 2026

The AI party will keep going as long as investors continue to fund it. Given the soaring valuations of OpenAI and Anthropic despite their history of losses, it seems investors are betting that their financials will eventually turn favorable.

Both OpenAI and Anthropic are raising tens of billions of dollars at ever-rising valuations.

• OpenAI raised $122 billion funding in a March fundraising round, bringing its valuation to $852 billion. The round included major commitments from Amazon (AMZN) of $50 billion, Nvidia (NVDA) of $30 billion, and SoftBank (SFTBY) of $30 billion.

• Anthropic hauled in $65 billion in a May fundraising round that pushed its valuation to $965 billion, just before it announced its initial public offering (“IPO”).

Investors want to see a track record of rising valuations on private companies, since it’s a sign of growing confidence in them, regardless of how much money they’re burning.

While Anthropic announced that it expects to earn $559 million in its second quarter, investors should not expect that profitability to continue. Anthropic’s management tempered investors’ expectations that it would be profitable for the rest of the year, as it invests heavily for growth.

Will Anthropic’s IPO prospectus – which reveals its detailed financials – or the revelation of OpenAI’s immense losses curb investors’ enthusiasm? In a rational world, sure. But investors routinely show that their actions are not based on financial realities but on market realities. That is, they’ll keep buying as long as prices are rising and will only sell when AI stocks start falling.

In other words, the party will keep going until it doesn’t. As long as well-heeled investors keep funding the losses, expect the AI boom to continue. When they decide it’s no longer worthwhile, expect a punishing snapback for many of the AI and tech stocks that are currently in favor.

Regards,

James Royal, PhD

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