OpenAI, the prominent company behind the widespread adoption of artificial intelligence (AI), could face a grim future. A report from Analytics India Magazine suggests that the company led by Sam Altman may face bankruptcy by the end of 2024 if its current cash burn rate continues.
The article highlights that running just one of its AI services, ChatGPT, costs nearly $700,000 (Rs 5.8 crore) per day. Altman has been striving to monetize GPT3.5 and GPT-4, but the company remains far from achieving profitability.
Although ChatGPT initially experienced rapid growth after its launch last year, recent months have seen a halt in this momentum, casting doubt on OpenAI’s ability to generate substantial revenue.
According to SimilarWeb, ChatGPT’s user base declined by 12 percent month-on-month from 1.7 billion users in June to 1.5 billion users in July.
The report indicates that it’s premature for leading AI companies like OpenAI, Anthropic, or Inflection to consider heading into the initial public offering (IPO) market to raise additional funds. Successful IPOs generally require at least a decade of operation and $100 million in revenue, according to Investopedia.
OpenAI is currently navigating these challenges, largely thanks to Microsoft’s $10 billion investment. However, given the projected annual revenue of $200 million in 2023 and an ambitious $1 billion in 2024, coupled with a declining user base, mounting losses seem inevitable. In May, the company’s losses doubled to $540 million since the AI chatbot’s development began.
The report highlights a key issue affecting ChatGPT’s revenue generation, which is the cannibalization of its API (Application Programming Interface). Companies are prohibiting employees from using ChatGPT for work but are leveraging the API to incorporate the large language model (LLM) into various workflows. APIs are structured methods for one program to provide services to other programs.
The ongoing tech rivalry between the US and China has further complicated OpenAI’s problems, leading to a scarcity of enterprise-level GPUs (Graphics Processing Units) in the market. Altman has repeatedly mentioned that this GPU shortage is hindering the company’s ability to train new models.
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