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AI revenue chart
(Sherwood News)

The AI revenue race heats up: OpenAI expecting $12.7 billion this year; Anthropic cuts deal with Databricks

Revenue projections are rosy, but companies are still burning huge piles of investor cash.

Jon Keegan

AI companies have been burning hundreds of billions of investors’ dollars to grow their businesses, trying to figure out the business model along the way. Just today, it was reported that OpenAI is finalizing a $40 billion funding round led by SoftBank with a valuation of $300 billion.

Bloomberg reports that OpenAI is expecting its revenue to triple this year to $12.7 billion. Last year, the ChatGPT maker pulled in $3.7 billion in revenue, according to the report. Recently, The New York Times reported that the company was on track to lose $5 billion in 2024. Microsoft has invested $13 billion in OpenAI.

OpenAI came to market early with its $20 per month subscription to ChatGPT, a price that doesn’t seem to match up with the operating costs for the service.

OpenAI CEO Sam Altman revealed recently that the company is losing money on its $200 per month ChatGPT Pro subscription, saying that “people use it much more than we expected.”

There are also paid ChatGPT plans for teams, enterprise, and education.

The Information recently reported that OpenAI was also considering charging $20,000 per month for “PhD-level agents.”

The cost of running ChatGPT services is likely to spike as all models going forward will be “reasoning” models, which take more expensive computing time to mull a problem and appear to increase the performance of the model. But it’s far from certain that the current product pricing will cover these huge costs.

Anthropic + Databricks

At least OpenAI is pulling in some serious cash. Competitor Anthropic is still playing catch-up with OpenAI and is also on a quest for revenue.

The Information reported that Anthropic is making about $115 million per month, a little more than one-third of what OpenAI is making, and the company burned $6.5 billion in cash last year.

To help juice that revenue, The Wall Street Journal is reporting that Anthropic has struck a five-year, $100 million deal to sell AI services to Databricks’ business customers.

Earlier this month, Anthropic said it raised another $3.5 billion, with a valuation of $61.5 billion. Founded by former OpenAI executives, the company has raised $8 billion from Amazon and expects to grow revenue to $34.5 billion by 2027.

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8%
Rani Molla

Some 8% of kids ages 5-12 have interacted with AI chatbots like OpenAI’s ChatGPT or Google’s Gemini, according to a new Pew Research Center survey of their parents. While that’s nowhere near the usage rates of other devices like smartphones or even voice assistants, it’s still notable for a relatively new technology — especially one that’s already had devastating consequences for young people.

tech
Rani Molla

Ives says he’s “relatively disappointed” in the price point of lower-cost Tesla models

On Tuesday, Tesla unveiled its long-awaited lower-cost cars, which turned out to be downgraded versions of the existing Model Y and Model 3. Tesla bull and Wedbush Securities analyst Dan Ives wasn’t particularly impressed with the price point, noting that it’s “still relatively high versus other vehicles on the market.”

The Model Y Standard and Model 3 Standard cost about $40,000 and $37,000, respectively. That’s more than the Model Y Premium and Model 3 Premium — what previous editions (or “trim levels”) are now called — cost last month, before the US federal government’s $7,500 tax credit expired. And the Standard models are missing a lot of Premium features, including Autopilot, second-row screens, and Tesla’s iconic glass roofs, among numerous other downgrades.

In other words, Tesla buyers will now be paying more for less, in what amounts to car-sized shrinkflation.

The stock closed down 4.5% yesterday on the news.

Ives doesn’t think it’s the end of the world but is “disappointed” in the price tag:

“We believe the launch of a lower cost model represents the first step to getting back to a ~500k quarterly delivery run-rate which will be important to stimulate demand for its fleet with the EV tax credit expiring at the end of September but we are relatively disappointed with this launch as the price point is only $5k lower than prior Model 3’s and Y’s.”

tech
Rani Molla

Nvidia helps boost xAI funding round to $20 billion

xAI’s latest funding round has now doubled to $20 billion from $10 billion a month ago, thanks in part to backing from Nvidia, which invested $2 billion in the equity portion of the transaction, Bloomberg reports. In an interview with CNBC, Nvidia CEO Jensen Huang confirmed the investment, adding that his “only regret” was that he didn’t give xAI more money.

The mix of $7.5 billion in equity and $12.5 billion in debt will finance a special purpose vehicle that will purchase Nvidia chips that xAI will then rent. It’s one of many circular AI deals these days that’s contributing to chatter over an AI bubble by some, while being seen by others as a rational way for industry leaders to boost the potential size of the addressable market and lift their longer-term prospects in the process.

Investors in Elon Musk’s other company, Tesla, will vote next month at the company’s annual shareholder meeting on whether to invest in xAI as well — an outcome Musk has he said supports.

Musk’s xAI Nears $20 Billion Capital Raise Tied to Nvidia Chips

Musk’s xAI Nears $20 Billion Capital Raise Tied to Nvidia Chips

The mix of $7.5 billion in equity and $12.5 billion in debt will finance a special purpose vehicle that will purchase Nvidia chips that xAI will then rent. It’s one of many circular AI deals these days that’s contributing to chatter over an AI bubble by some, while being seen by others as a rational way for industry leaders to boost the potential size of the addressable market and lift their longer-term prospects in the process.

Investors in Elon Musk’s other company, Tesla, will vote next month at the company’s annual shareholder meeting on whether to invest in xAI as well — an outcome Musk has he said supports.

Rani Molla
Electric Slide
10/7/25
Tesla unveils cheaper Model Y and Model 3

The company announced a $39,990 Model Y today.

Tesla new model teaster
$1T
Jon Keegan

In the past few weeks, OpenAI has announced a flurry of massive deals with Oracle, Nvidia, CoreWeave, AMD, and others as hundreds of billions fly between technology partners racing to expand AI infrastructure at unprecedented scale. The Financial Times tallied it all up and found that the company has signed about $1 trillion worth of deals, and it isn’t clear at all that it will be able to fund them.

The “circular” nature of some of these arrangements is also one factor playing into fears that we’re in an AI bubble.

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