OpenAI Report on Verge of Bankruptcy and Projected $5 Billion Losses

According to a report, OpenAI may face a loss of up to $5 billion in 2024, potentially leading to bankruptcy within 12 months for the startup.

According to The Information, the company led by Sam Altman is using excessive amounts of cash, which may lead to bankruptcy if additional funding is not secured within the next 12 months.

According to the report, OpenAI is projected to allocate approximately $7 billion towards AI training and an additional $1.5 billion towards staffing. This amount is significantly higher compared to its competitors such as Anthropic, which is backed by Amazon and has a projected burn rate of $2.7 billion by 2024, as stated by undisclosed financial data and sources within the company.

According to the report, the company may be forced to secure additional financing within 12 months to continue operating due to these expenses.

According to a report by Semianalysis, the cost of operating OpenAI’s AI chatbot, ChatGPT, is $694,444 per day in computer hardware expenses alone. This amount would significantly increase when considering operational costs, research and development, and staffing expenses. Therefore, OpenAI is a costly business to run.

SCOOP: OpenAI may lose $5B this year & may run out of cash in 12 months, unless they raise more $, per analysis @theinformation.Investors should ask: What is their moat? Unique tech? What is their route in profitability when Meta is giving away similar tech for free? Do they… pic.twitter.com/i5EkvEFEQd

— Gary Marcus (@GaryMarcus) July 24, 2024

According to the Financial Times, OpenAI has an estimated annual revenue of $2 billion and is currently valued at over $80 billion by investors. Furthermore, the company is optimistic that its revenue will more than double by 2025, as it has seen a significant demand from businesses seeking to integrate its generative AI tools into their operations.

Despite the accuracy of The Information’s report on OpenAI’s losses, it is improbable that the company will face bankruptcy in the near future. With the support of investors such as Microsoft and Sequoia, the company is expected to obtain funding in their upcoming round of financing.

Despite projected declines, OpenAI remains dedicated to growth. Just recently, it unveiled SearchGPT, an AI-driven search platform that directly competes with Google. While currently only available for 10,000 users, it is expected to be available to a larger audience in the near future.