Bank of America Corp. (NYSE: BAC) agreed in recent weeks to provide a $520 million credit line to OpenAI after previously turning down the artificial intelligence developer's request, according to people familiar with the matter.
Executives at the bank had rejected an earlier approach as recently as last year, reflecting skepticism about businesses with large capital expenditures and business models that had not yet produced earnings. Chief Executive Officer Brian Moynihan has promoted a strategy of "responsible growth," which the bank says discourages corporate clients from pursuing speculative risk.
People with knowledge of the situation said OpenAI's preparations for an initial public offering played a role in the reversal. Bank of America, the second-largest U.S. lender, considers involvement in a high-profile stock listing to be strategically important for its Merrill Lynch wealth advisory division.
The $520 million commitment joins an existing undrawn facility arranged by other banks, lifting the total committed but unused capital available to OpenAI to more than $5 billion. One person familiar with the discussions said Bank of America became more willing to finance AI companies after concluding that the market would support their business models even when those companies have not yet reached profitability.
Management at the bank also noted investor appetite for backing AI firms at valuations that are not directly tied to current earnings, and that shift in market sentiment helped increase the bank's confidence in extending credit to the sector, the people said.
Summary
Bank of America approved a $520 million credit line for OpenAI after previously declining a similar request. The decision was influenced by OpenAI's planned IPO and a broader change in investor willingness to fund AI companies at valuations not linked to earnings. The new commitment adds to existing undrawn facilities, taking total available capital for OpenAI above $5 billion.
Key points
- Bank of America extended a $520 million credit line to OpenAI in recent weeks after earlier declining the request.
- OpenAI's preparations for an initial public offering were a factor in the bank's decision, which also aligns with Merrill Lynch's interest in participating in major listings.
- The commitment increases the total committed capital available to OpenAI to more than $5 billion, combining the new facility with existing undrawn financing.
Risks and uncertainties
- OpenAI and similar AI companies may lack current profitability, creating uncertainty about long-term credit performance; this affects lenders and the broader financial sector.
- Bank of America's earlier skepticism reflects concerns about high capital spending and unproven business models, a risk that remains for the technology and AI sectors.
- Market sentiment that supports valuations not tied to earnings could change, affecting both investor appetite and banks willingness to provide financing to AI firms.