OpenAI CEO Sam Altman is aiming for a $1 trillion valuation for the initial public offering (“IPO”) of the artificial-intelligence (“AI”) model company. But the increasingly poor economics of AI and the company’s terrible financials mean that even an already delayed IPO may never arrive.

OpenAI is facing white-hot competition, with the company now severely marking down the price of high-end AI models created just weeks before. Altman and his public relations team tried to balance that news with the fact that OpenAI’s customers now comprise more than 1 billion users and more than two million businesses. Instead, investors need to pay attention to OpenAI’s lack of pricing power.

In late July, Altman announced the following price cuts on two recently adopted models and an upgrade on a third model.

As part of the announcement, OpenAI explained that GPT-5.6 had become more efficient to run, so the company said: “We’re passing those gains on to customers with lower prices…”

It’s a sales pitch that feels a lot like a seedy car salesman trying to “get you in a new car today.” But businesses aren’t usually trying to lower prices – their profit driver – unless they need to. And that’s even more true for a company’s latest and greatest models, as is the case at OpenAI.

That’s the tough situation OpenAI finds itself in today, as Chinese AI rivals such as Kimi K3 and DeepSeek models make heavy incursions into OpenAI’s user base. They’re releasing high-power AI models that do most of what OpenAI’s (and Anthropic’s) models do, but they charge a fraction of the price, sometimes just a few percentage points of what higher-end models charge.

It’s a price war that OpenAI simply can’t afford, one way or the other. OpenAI is already burning cash furiously and must be propped up by its customers. At the same time, it needs revenue to make good on an estimated $1.4 trillion in spending commitments in the coming years.

Either way, the company may well go broke. Many firms that are counting on it for revenue – Oracle (ORCL), Cerebras Systems (CBRS), and CoreWeave (CRWV) – may be badly hurt.

So, OpenAI must raise money to continue operating, but investors need to see a credible path to profitability before Altman’s IPO goal of $1 trillion can ever come to fruition. This impasse means that OpenAI has tentatively delayed its IPO until 2027, but it may be “delayed” permanently.

OpenAI’s Cash Burn Is Probably Getting Worse

The unprecedented scale of OpenAI’s ability to lose money is something to behold. OpenAI reported an operating loss of $20.9 billion in 2025 and estimates for the first quarter of 2026 peg its operating loss at a further $7 billion. At this rate, OpenAI could easily lose $30 billion in 2026 and possibly even $35 billion to $37 billion. We’ll have to wait for leaked financials for a better idea.

But a price war won’t likely improve profitability, even if it does increase sales for the moment.

In fact, we’re seeing OpenAI’s sales continue to soar, though the company’s executives provided only very high-level financials. CFO Sarah Friar told employees that OpenAI’s July annualized recurring revenue had exceeded the company’s total for the second quarter, according to CNBC.

While that feat may actually be less impressive than it sounds at first, it does indicate a ramp in sales at the end of the quarter. But it may well be one that the company can’t afford.

The interesting detail here is what leaders attributed the growth to: the company’s enterprise agent ChatGPT Work, its AI coding tool Codex, and its GPT-5.6 series of models.

That is, the same GPT model that OpenAI put on sale at a severe discount at the end of July.

For normal companies, sales growth translates into scaling profitability. In OpenAI’s case, higher sales translate into even greater losses, and we have plenty of signs that OpenAI is burning more cash than ever, as it’s forced to lower prices to keep getting business.

So, higher sales are not good news when you’re losing more money in absolute terms.

The inability to price AI models so that they’re profitable shows that AI models are mostly fungible. Businesses are shifting to the lowest-cost model to carry out their work, and some are reserving the high-cost models for their best and highest uses. But Chinese AI models have been showing that they, too, can move upmarket, leaving less room for OpenAI here, too.

For example, among AI startups using open-source software, about 80% are using Chinese AI models, according to Andreessen Horowitz.

While OpenAI struggles to get itself in shape for an IPO, China’s DeepSeek is planning its own public offering by the end of 2026 or early next year.

OpenAI’s Next Funding Round

All this means that OpenAI is likely to be burning even more cash at an even faster clip than before. The upshot then is that it will need to raise another funding round sooner than some may have thought. OpenAI last raised $122 billion in March, valuing the company at $852 billion.

OpenAI is under significant constraints, however. Venture-stage companies do not like to raise money at a lower valuation than the prior funding round. It indicates that something’s not right and dings the company’s reputation. That reputational worry is even greater in the field of AI, which is being hyped as much as any technology ever has been. If OpenAI can’t raise its valuation in the next funding round, it will look like there’s something wrong. (And there is…)

OpenAI needs to raise money at ever-higher valuations to keep the market’s confidence up and so that it can retain the potential to raise even more money in the future.

Of course, Altman wants to line up funding before he needs it, too. Increasingly larger losses in future quarters will hurt investors’ confidence to put up more cash. At the same time, ready cash that can subsidize its ongoing losses means OpenAI is not immediately subject to the market’s whims, giving Altman some maneuvering room if funding conditions tighten for a while.

Like the last funding round in March, OpenAI’s next round is likely to be funded by mega-cap companies that need the AI party to continue. Last time out, Amazon (AMZN), Nvidia (NVDA), and SoftBank (SFTBY) put up $110 billion of the $122 billion raised by OpenAI. Investors may need to raise cash from the debt markets themselves to plow into the money-losing OpenAI.

OpenAI is a linchpin in the AI economy, since it’s promised to spend literally more than $1 trillion across some of the biggest AI-related firms. If it’s unable to meet these commitments – and it must raise the cash to do so – the dominoes will begin to fall across the entire AI sector.

Confidence is key in these situations, and investors are already feeling skittish after a poor debut from SpaceX (SPCX) and massive declines in memory stocks such as Micron Technology (MU). The inability of OpenAI to raise at a higher valuation could be a sign that the Teflon stock market for AI stocks may be about to turn. So, keep a close eye on OpenAI’s ability to raise funding.

Regards,

James Royal, PhD

Editor’s Note: One company quietly beat Apple, Amazon, and the S&P 500 — combined. Over the long run it has returned more than 8,300%… enough to turn $10,000 into $830,000. Yet most investors have never heard of it. Former fund manager Whitney Tilson says right now it’s trading at a rare discount — and he’s revealing the name and ticker, free of charge. Click here for the details…

OpenAI IPO Delay FAQ

Why is OpenAI’s IPO delayed?

OpenAI has tentatively delayed its IPO until 2027. Sam Altman is holding out for a $1 trillion valuation, but investors need to see a credible path to profitability before that can happen, and OpenAI hasn’t demonstrated one.

When will OpenAI’s IPO happen?

OpenAI has tentatively set 2027 as its new timeline, after already delaying the offering once before. Given OpenAI’s mounting losses and the pricing pressure it’s facing from competitors, that date isn’t set in stone.

Could OpenAI’s IPO never happen at all?

It’s possible. OpenAI’s already-delayed IPO may never arrive at all, given the increasingly poor economics of AI and the company’s own terrible financials. What looks like a delay to 2027 could turn out to be permanent.

Why is OpenAI cutting the price of its AI models?

In late July, OpenAI cut prices on GPT-5.6 Luna by 80% and Terra by 20%, just weeks after launching them. OpenAI said it was passing along efficiency gains, but the cuts come as Chinese AI rivals like DeepSeek and Kimi K3 offer similar models for a fraction of the cost.

How much money is OpenAI losing?

OpenAI reported a $20.9 billion operating loss in 2025, with estimates putting its first-quarter 2026 loss at another $7 billion. At that pace, OpenAI could lose $30 billion to $37 billion in 2026.

How much has OpenAI raised in funding, and at what valuation?

OpenAI raised $122 billion in March at an $852 billion valuation, with Amazon, Nvidia, and SoftBank contributing $110 billion of that total. OpenAI will likely need to raise again soon, and doing so at a lower valuation than its last round would signal to the market that something is wrong.

Which stocks could be hurt if OpenAI’s IPO stalls or fails?

Companies that depend on OpenAI for revenue, including Oracle, Cerebras Systems, and CoreWeave, could be badly hurt. OpenAI has promised more than $1 trillion in spending commitments across the AI industry, and if it can’t raise the cash to meet them, the dominoes could begin to fall across the entire AI sector.

The post OpenAI IPO Delay: Just the Start? Price Cuts Hint It May Not Happen at All appeared first on MarketWise.

Major technology sectors – semiconductors, software, and artificial intelligence (“AI”) – are some of the stock market’s hottest investments right now. With major tech companies investing in AI at record levels, many related stocks have surged to all-time highs over the past year.

For investors looking to ride this investment wave, it can be challenging to pick individual tech stocks. An easier way to get diversified exposure to these companies and find winners is to invest in some of the best tech exchange-traded funds (“ETFs”), often for a low cost.

The best tech ETFs in chips, software, and AI have returned 30%, 40%, and even 50% annually over the past three years – without investors needing to analyze and trade stocks.

While tech darlings such as Nvidia (NVDA) and Broadcom (AVGO) have raced higher for years, the big winners aren’t all trillion-dollar mega-cap stocks. In fact, even smaller chip companies and lesser-known software and AI companies can offer huge returns in the investment boom.

So, the best tech ETFs offer an accessible way for investors of all skill levels to invest in a portfolio of winning stocks across the semiconductor, software, space, and AI sectors.

Top Tech ETFs to Invest in for 2026

How MarketWise Selected These Funds

MarketWise chose its best tech funds based on the following criteria:

• Funds with exposure to the semiconductor, software, AI industries, and others
• Funds with at least three years of strong returns
• A reasonable expense ratio
• No leveraged or inverse funds

1. VanEck Semiconductor ETF (SMH)

This fund tracks the MVIS U.S. Listed Semiconductor 25 Index, which includes 25 semiconductor production and equipment companies. This fund also makes our list of best semiconductor ETFs.

This VanEck fund is the market’s largest semiconductor-focused ETF, and it charges a fair 0.35% expense ratio. Its returns were notably strong over the past year and three years, and even its five-year returns bested the largest chip-focused funds, too.

Assets under management: $70.5 billion

Top holdings: Nvidia, Taiwan Semiconductor Manufacturing (TSM), Broadcom, Micron Technology (MU), Advanced Micro Devices (AMD)

2. Invesco PHLX Semiconductor ETF (SOXQ)

This passively managed Invesco fund tracks the PHLX Semiconductor Sector Index, which includes the 30 largest semiconductor companies listed on U.S. exchanges. The fund’s low expense ratio of 0.19% means that more money stays in your pocket rather than going to the fund manager.

This chip fund recorded the best one-year returns on our list as well as the second-best annualized returns here over the past three years. It’s a testament to the fact that you don’t need a high-cost fund to achieve attractive total returns.

Assets under management: $2.9 billion

Top holdings: Nvidia, Broadcom, Micron Technology, Applied Materials (AMAT), Marvell Technology (MRVL)

3. State Street SPDR S&P Kensho Final Frontiers ETF (ROKT)

This passive fund tracks the S&P Kensho Final Frontiers Index, which includes companies driving the exploration of space and the deep seas.

The fund has had a tremendous run over the past year and three years, and yet it still charges a not-too-costly expense ratio of 0.45%, putting it among the lower half of expense ratios on the list, despite those stellar returns. This State Street fund also ranks in our list of best space ETFs.

Assets under management: $209.2 million

Top holdings: Oceaneering International (OII), Ducommun (DCO), RTX (RTX), Forum Energy Technologies (FET), Heico (HEI)

4. Franklin Intelligent Machines ETF (IQM)

This Franklin actively managed fund invests in stocks that fit the theme of intelligent machines, where AI is driving the “transformation of products, software, systems and machinery as well as product design, manufacture, logistics, distribution and maintenance….,” according to the prospectus.

Despite being an actively managed fund, it doesn’t charge a steep expense ratio, at just 0.5%. And it has delivered some outstanding annual returns over the past year and three years.

Assets under management: $108.7 million

Top holdings: Nvidia, Taiwan Semiconductor Manufacturing, Celestica (CLS), Broadcom, SanDisk (SNDK)

5. Procure Space ETF (UFO)

This passively managed fund tracks the S-Network Space Index, which includes companies with a majority of their sales coming from space-related sectors, including satellite-based telecoms, space technology and hardware, as well as rocket and satellite manufacturing, among others. The fund’s above-average expense ratio of 0.75% has been worth the extra returns you’re getting, at least so far.

This fund’s portfolio is more tightly focused on telecom names such as Viasat and Sirius XM, as well as rocket companies such as SpaceX (SPCX) and Rocket Lab (RKLB). So, the fund may be a better pick for investors with that kind of investment angle on space.

Assets under management: $609.7 million

Top holdings: Viasat (VSAT), Sirius XM (SIRI), Trimble (TRMB), Garmin (GRMN), AST SpaceMobile (ASTS)

6. Invesco AI and Next Gen Software ETF (IGPT)

This passively managed Invesco ETF tracks the STOXX World AC NexGen Software Development Index, which includes “companies with significant exposure to technologies or products that contribute to future software development through direct revenue,” per the prospectus.

The fund’s one-year performance at more than 80% is nothing short of amazing, while its three-year annualized performance approaches 40% – all for a reasonable expense ratio.

Assets under management: $1.2 billion

Top holdings: Advanced Micro Devices, Alphabet (GOOGL), Nvidia, Meta Platforms (META), Micron Technology

7. Amplify Bloomberg AI Equal Weight ETF (AIVC)

This passively managed Amplify fund tracks the Bloomberg AI Value Chain Equal Weight Total Return Index, which includes cloud computing, semiconductor, and hardware companies that form the basis of AI technologies. The fund uses an equal-weight approach, where stocks have a broadly similar position size in the portfolio.

The fund’s price has effectively doubled over the past year, while its 44% annualized returns over the past three years would have generated some significant wealth. This fund’s returns have been among the best on this list of superstars, and it charges a not-too-high expense ratio.

Assets under management: $120.9 million

Top holdings: Alibaba (BABA), Atlassian (TEAM), Hewlett Packard Enterprise (HPE), Microsoft (MSFT), Snowflake (SNOW)

Are Tech Stocks a Good Long-Term Investment?

Tech stocks have long been among the market’s most popular investments. The best stocks offer scalability – that is, their profits can grow much faster than their sales. As they grow, their profits often soar as their operating margin improves.

Semiconductor stocks have performed very strongly in the past few years, as Big Tech companies, such as Microsoft and Alphabet, have poured money into AI investments. However, much of this high return has occurred in the past year, with two funds in the list up about 100% or more.

This level of performance will be hard-pressed to continue over time, even if semiconductors do post attractive long-term returns. It’s effectively impossible for a stock or fund to put up this level of return over extended periods. So, investors should expect returns to come back to more normal levels, say 20% annually over time. Even this more manageable level will build huge wealth over time.

For investors who like the prospects of the top tech stocks, it’s important to invest cautiously, especially after the phenomenal returns over the past year and three years. Take a long-term view on the market and invest regularly over time. Doing so helps reduce your risk of buying at a relatively high point, and it still can deliver attractive long-term returns.

Regards,

James Royal, PhD

Editor’s Note: One company quietly beat Apple, Amazon, and the S&P 500 — combined. Over the long run it has returned more than 8,300%… enough to turn $10,000 into $830,000. Yet most investors have never heard of it. Former fund manager Whitney Tilson says right now it’s trading at a rare discount — and he’s revealing the name and ticker, free of charge. Click here for the details…

The post 7 Top Tech ETFs to Invest in Semiconductor, AI, Software, and Space Stocks appeared first on MarketWise.

Soaring prices for computer memory chips, skyrocketing debt at hyperscalers, and price wars have been worrisome for investors in the artificial intelligence (“AI”) trade. You can add the Federal Reserve to that growing list of concerns, as the U.S. central bank may raise interest rates at its next meeting in September.

The Fed is looking to reduce inflation, which has risen significantly from the bank’s long-term target of 2% in recent months. From a recent low of 2.4% in February, inflation rose to 4.2% in May but then dipped back down to 3.5%. Fed policymakers are waiting to see if inflation cools further or whether soaring energy prices will become more embedded in the economy.

The soaring inflation is due to President Trump’s tariffs as well as the effects of the Iran War, which has drastically cut the supply of oil coming from the Persian Gulf. Rising oil prices affect almost all sectors of the economy, which then raise their own prices to offset the impact.

Newly appointed Fed chair Kevin Warsh has talked a good game about getting inflation under control. But his reputation – a key reason that President Donald Trump appointed him – is as someone who would be more interested in keeping interest rates low.

Currently, there’s about a 60% chance that the Fed raises rates by 0.25 percentage points at its September meeting, according to the CME Group’s FedWatch. It also estimates the odds at more than 33% that the Fed will raise rates by 0.50 percentage points or more in total by its December meeting.

If the Fed raises short-term rates, it could put significant pressure on an increasingly tenuous funding environment for the AI industry. Rising rates would reduce the affordability of credit for funding the AI build-out. Higher rates translate into less money flowing through the industry, while AI firms desperately need adequate access to capital to continue.

But if the Fed sees inflation staying low, AI stocks may rebound hard from a ripping point. That’s why it’s important to keep a close eye on inflation and the Fed’s response to it.

AI Requires Massive Debt Financing

The AI build-out – the massive spending going into AI data centers, costly memory chips, and AI model training – can continue at its breakneck pace only as long as firms can borrow cheaply.

The biggest AI investors, including Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOGL), Oracle (ORCL), and Meta Platforms (META), are borrowing hundreds of billions of dollars so that they can keep building the capabilities that they say will be needed in future years.

In total, the big four hyperscalers – everyone above but Oracle – are expected to spend some $725 billion this year. Many analysts expect this figure to top more than $1 trillion in 2027. They simply don’t have the cash flow to pay for this level of build-out without borrowing heavily.

In fact, the borrowing has already become so intense that investors are beginning to pull back somewhat. They’re requiring incrementally higher yields on debt being issued by even top-tier borrowers, such as the hyperscalers above, and showing less overall interest in buying bonds.

For example, last month, Amazon marketed $25 billion in bonds and had to raise the rates on its longest-duration notes. Plus, demand was not as robust as it had been. Orders came in at just 2.5 times the bonds being offered, compared with 3.2 times in a March debt offering.

In the case of Oracle, investors are becoming even more skittish about the company’s debt. The cost to insure the company’s bonds against default over the next five years, through derivatives known as credit default swaps, has risen aggressively since mid-2025 and keeps rising.

Oracle is already substantially indebted and will likely have to sell even more bonds to meet its investing commitments. S&P Global Ratings recently downgraded Oracle’s debt to one notch above “junk” status, and a further downgrade could raise its future cost of borrowing. This setup means that Oracle stock could fall another 50% after already being cut in half earlier this year.

Meanwhile, less well-heeled AI players such as CoreWeave (CRWV) are being forced to cough up junk bond-like yields for much more modest borrowings. It’s negotiating a bond at a rate 5.5 percentage points above the benchmark, or up to 1.25 percentage points above its initial talks. Already, that amounts to a yield of more than 9%. Firms needing to raise money could see their benchmark rate rise and therefore their actual rate, if the Fed decides to raise short-term rates.

So, if the Federal Reserve raises interest rates, it could rapidly put a damper on the fundraising that’s so critical to the AI build-out, even as investors are already questioning AI’s economics.

OpenAI, Anthropic Must Raise Money to Survive

The necessity of even the largest companies to raise money shows how much the AI build-out relies on affordable credit. This is something that will be felt the most by financially weaker players, names such as OpenAI and Anthropic, that need financing to survive. These companies are burning cash furiously – OpenAI recorded an operating loss of $20.9 billion in 2025 alone.

These AI modelers are effectively no longer being funded by the usual Silicon Valley venture capital investors. The same companies above that are funding them must raise money and so are subject to the same dynamics in the credit market as everyone else.

For example, in its March funding round, OpenAI raised $122 billion, but almost all of it ($110 billion) came from three investors:

• Amazon: $50 billion

• Nvidia (NVDA): $30 billion

• SoftBank (SFTBY): $30 billion

If the Fed raises interest rates, it will reduce the capacity of large investors such as these and the hyperscalers to raise incremental capital, hurting their ability to fund OpenAI and Anthropic.

Perpetual money burners such as OpenAI MUST raise money to survive, since it cannot make money on its own. Given its estimated $1.4 trillion in spending commitments – money that’s spent all over the AI industry – OpenAI is essential to propping up the AI sector.

If companies find it increasingly less affordable to raise money – perhaps due to the Fed raising short-term rates – it has the potential to spiral out of control, popping the AI bubble. The road to bursting the AI bubble may run right through the Federal Reserve.

Regards,

James Royal, PhD

Editor’s Note: Whitney Tilson — the hedge fund manager CNBC called “The Prophet” — says America has reached its “Ripping Point.” The old financial order is being torn apart, and he believes most investors have no idea what’s coming in the next six months. He’s named the stocks he thinks will be destroyed in the chaos — and the ones he believes will soar. Watch his free presentation while it’s still available. 

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