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 though the need to finance this does require a lot of parties to do deals together.”
• On the growth front, OpenAI said ChatGPT has 50 million paying consumer subscribers, up from a reported 35 million in July 2025, and 9 million business subscribers, up fourfold from September. It also issued a joint statement with longtime investor Microsoft, reaffirming their previously rocky relationship as OpenAI cozies up to Amazon.

Deal or No Deal: OpenAI announced its agreement with the Pentagon mere hours after President Donald Trump ordered government agencies to phase out the use of Anthropic products within six months. Anthropic refused to sanction the use of its technology in mass surveillance of Americans or deadly fully autonomous weapons systems, which led Defense Secretary Pete Hegseth to designate the company a “supply chain risk.” Anthropic said it plans to sue. On Saturday, Altman deemed Hegseth’s decision an “extremely scary precedent” and, in a blog post, OpenAI said its deal with the Pentagon enshrines red lines similar to those in Anthropic’s. However, Altman said, the lines could change.