OpenAI may face bankruptcy within year due to high cost of ChatGPT, say reports
OpenAI logo and rising stock graph are seen in this illustration taken, February 3, 2023. (Reuters Photo)
OpenAI, a leading force in artificial intelligence, is grappling with significant financial challenges that could threaten its future. Despite substantial backing from Microsoft, the company faces a projected loss of $5 billion in 2024, according to reports.
Mounting operational costs
Operating the AI chatbot ChatGPT is extraordinarily expensive, costing approximately $700,000 daily in hardware alone. This figure is expected to rise as the models become more sophisticated.
OpenAI’s total spending on AI training and staffing is projected to reach $7 billion and $1.5 billion, respectively, in 2024. These expenditures significantly surpass those of its competitors, like Amazon-backed Anthropic, which anticipates a burn rate of $2.7 billion for the same period.
Revenue, financial strain
Despite generating around $2 billion annually from ChatGPT and an additional $1 billion from language model access fees, OpenAI’s revenue is insufficient to cover its soaring operational costs.
The company’s valuation stands at over $80 billion, with investors hopeful that revenues will more than double by 2025 because of growing interest from businesses in its generative AI tools.
OpenAI has raised over $11 billion through seven funding rounds and benefits from discounted access to Microsoft’s Azure services.
Nevertheless, the company is operating near its capacity, with 290,000 of its 350,000 servers dedicated to ChatGPT.
Future outlook
OpenAI’s financial predicament has raised concerns about its ability to sustain operations without additional funding. The company must secure more capital within the next 12 months to avoid bankruptcy.
Despite these challenges, OpenAI remains focused on advancing artificial general intelligence (AGI), with CEO Sam Altman leading the charge.
Continued expansion
In a bid to diversify its offerings and revenue streams, OpenAI recently announced the launch of its AI-powered search engine, SearchGPT. Initially limited to 10,000 users, the service is expected to roll out more widely soon, further cementing OpenAI’s position as an AI pioneer.
