OpenAI faces financial strain despite AI boom
The AI industry is booming, making major tech companies very profitable. Microsoft, Apple, and NVIDIA are competing for the world’s most valuable company title. Analysts credit their revenue and profit growth to their early investments in AI technology and its integration into their products and services.
Ironically, OpenAI, a significant player in AI, might face losses of up to $5 billion in 2024. A recent report shows that the creator of ChatGPT could run out of cash within the next year.
To put things in perspective, OpenAI spends about $700,000 daily to maintain ChatGPT. This cost is expected to rise as the model becomes more advanced. The report highlights that OpenAI is on track to spend $7 billion on training its AI models and another $1.5 billion on staffing, which fairly exceeds its competitors’ spending projections for 2024.
Although OpenAI benefits from discounted access to Microsoft’s Azure services, its rapid AI advancements are straining its finances.
According to Appfigures, the launch of GPT-4o caused a significant spike in OpenAI’s ChatGPT revenue and mobile downloads. ChatGPT generates up to $2 billion annually, with an additional $1 billion from access fees, resulting in an estimated total revenue of $3.5 to $4.5 billion per year.
Despite this, OpenAI’s income barely covers its operating costs. The company has already completed seven funding rounds, raising over $11 billion, and is currently valued at $80 billion. Additionally, 290,000 of its 350,000 servers are dedicated to ChatGPT, indicating it is operating at nearly full capacity.
