What you need to know
- OpenAI is reportedly on the verge of bankruptcy with projections of a $5 billion loss.
- The startup spends $7 billion on training its AI models and $1.5 billion on staffing.
- The ChatGPT maker’s operation costs aren’t satisfied by the approximate $3.5 billion generated in revenue.
The booming AI business strategy is placing major tech corporations invested in the landscape on a profitable path. In the past few months, we’ve watched Microsoft, Apple, and NVIDIA battle for the world’s most valuable company crown. Market analysts attribute their growth in revenue and profits to their early investment in and adoption of the technology across their products and services.
Ironically, OpenAI, a key player in the AI landscape, could make losses amounting to $5 billion in 2024. According to a report by The Information, the ChatGPT maker might be on the brink of bankruptcy, with projections indicating it could run out of cash in the next 12 months.
SCOOP: OpenAI may lose $5B this year & may run out of cash in 12 months, unless they raise more $, per analysis @theinformation.Investors should ask: What is their moat? Unique tech? What is their route in profitability when Meta is giving away similar tech for free? Do they… pic.twitter.com/i5EkvEFEQdJuly 24, 2024
For context, OpenAI spends up to $700,000 daily to keep ChatGPT running. The amount is likely to fluctuate as the model becomes more sophisticated and advanced. The report sheds more light on OpenAI’s financial status, citing that the firm is well on its way to spending a whopping $7 billion on training its AI models and an additional $1.5 billion on staffing. These expenses alone stack miles ahead of its rivals’ expenditure predictions for 2024.
OpenAI is running on fumes, but remains focused on AGI
OpenAI reportedly receives discounted access to Microsoft’s Azure services. However, the rapid advances of its AI ventures are placing the firm in a financially strained position.
According to a report by Appfigures, GPT-4o’s launch led to the “biggest spike ever” in OpenAI’s ChatGPT revenue and downloads on mobile. The start generates up to $2 billion annually from ChatGPT and an additional $ 1 billion from LLM access fees, translating to an approximate total revenue of between $3.5 billion and $4.5 billion annually.
RELATED: ChatGPT’s fate hangs in the balance as OpenAI reportedly edges closer to bankruptcy
However, this barely covers the firm’s operational costs. It’s worth noting that the company has already gone through seven rounds of funding, raising over $11 billion, and is currently valued at $80 billion. It’s also reported that OpenAI is running near total capacity, with 290,000 of its 350,000 servers dedicated to its AI assistant, ChatGPT.
While it remains unclear if OpenAI will find an alternative source of income or secure additional funding for its advances, CEO Sam Altman is entirely focused on achieving artificial general intelligence (AGI).
