OpenAI, the non-profit research company that created the powerful GPT-4 language model, is burning through cash at an alarming rate. The company is spending roughly $700,000 per day to run its ChatGPT service, and its investors are starting to get nervous.
In a report published by Analytics India Magazine, it was revealed that OpenAI's losses have doubled since it started developing ChatGPT. The company is now losing over $500 million per year, and it could go bankrupt by the end of 2024 if it doesn't find a way to turn a profit.
“Microsoft's $10 billion investment in OpenAI is possibly keeping the company afloat at the moment. But on the other hand, OpenAI projected an annual revenue of $200 million in 2023, and expects to reach $1 billion in 2024, which seems to be a long shot since the losses are only mounting,” the report said
There are a few reasons why OpenAI is in such financial trouble. First, ChatGPT is not as popular as the company had hoped. After hitting a record high of 1.9 billion user visits in May 2023, the service has seen a steady decline in traffic.
This is a problem all chatbots are facing, with both Bing Chat and Google Bard not becoming hugely popular. Of course, Microsoft and Google and ride the costs, but at the moment chatbots are toys for many users more than valuable tools. That may change in time but OpenAI may not be able to afford to wait for the market to mature.
OpenAI is facing competition from other open source LLM models. Meta's Llama 2, in partnership with Microsoft, is allowing people to use the model for commercial purposes. This is a major threat to OpenAI, as it could lead to a mass exodus of users from ChatGPT.
Microsoft's Connection and the Future
Of course, Microsoft is also deeply tied to OpenAI. Redmond has been a long-time investor in OpenAI, including a $1 billion cash injection in 2019 and a further $10 billion investment earlier this year. That collaboration has allowed Microsoft to play a key role in developing OpenAI's Codex and GPT models, and integrate GPT-4 into Bing Chat, Bing Image Creator, Microsoft 365 Copilot, and more.
When Microsoft's last investment was revealed, there were rumors that the company takes 49% of all profits from OpenAI. While the two companies deny this is the make up of the partnership, it is likely Microsoft does take a cut. OpenAI has plenty of traction, including becoming one of the most visited websites, but it seems it is struggling to convert interest into profit.
With Microsoft also reportedly taking a slice, the company may start questioning its long-term interest in OpenAI. It seems unlikely that OpenAI will shut down, considering its role as a leader in AI research and development. In other words, the company may need to sell up to a bigger tech brand or find more investments.
Interestingly, the original goal of OpenAI was to be a non-profit AI research firm. It was started by Altman, Elon Musk, and other investors in 2015. Musk has since left to focus on Tesla, mess up Twitter, and cause trouble with controversial views. Even so, he has been critical of OpenAI becoming so close to Microsoft and then turning to become a profit-making company.