The startup OpenAI, which developed the generative AI chatbot ChatGPT and launched the AI boom, spends billions of dollars annually on technology development and personnel, according to The Information. Some analysts suggest that due to these huge expenses, the company may be on the verge of bankruptcy within 12 months.
Previously, it was reported that OpenAI spends about $700,000 daily just to support the functioning of ChatGPT, and this amount is expected to continue growing. Based on previously undisclosed financial data, The Information states that OpenAI will spend $7 billion this year on training AI models, while its personnel costs will amount to $1.5 billion. The publication suggests that OpenAI’s losses for the year could reach $5 billion, and if it does not attract additional capital, it may run out of money in 12 months.
One expert questioned, “Investors should ask: what is their benefit? Unique technology? What is its path to profitability when Meta is giving away similar technologies for free?”
Revenue and CEO’s Perspective
OpenAI reportedly receives up to $2 billion in revenue per year from using ChatGPT and about $1 billion for providing companies with access to large language models (LLM). However, this barely covers its operating expenses. Notably, this situation doesn’t seem to concern OpenAI CEO Sam Altman. He once stated, “I don’t care if we spend $50 billion a year, we are building strong artificial intelligence (AGI), and it is worth it.”
The Information highlighted another potential issue for OpenAI’s business: a growing number of industry analysts who believe generative AI is a bubble that will burst within the next 12 months. Some investors are also questioning how long Nvidia can maintain its massive growth, which has propelled it to become the third-largest company in the world by market value, notes NIXSOLUTIONS. This skepticism comes as the generative AI hype continues despite the failure to recoup investment, delusions, and the need for more data centers to handle AI workloads.
It’s worth noting that this is not the first publication to suggest OpenAI may face financial problems. Last year, The Economic Times wrote that the high costs of training AI models could lead the company to bankruptcy.
As the situation continues to evolve, we’ll keep you updated on OpenAI’s financial status and its impact on the AI industry. The coming months will be crucial in determining whether the company can overcome these challenges and maintain its position as a leader in AI development.