The report said that the company might go bankrupt by the end of 2024.
OpenAI, the AI studio led by Sam Altman might be on the brink of a potential financial crisis, as outlined in a report by Analytics India Magazine. The report said that the company might go bankrupt by the end of 2024.
The report says that it costs OpenAI about $700,000 (Rs 5.80 crore) every day to run just one of its AI services- ChatGPT. Mr Altman’s OpenAI is burning through cash at the moment. Despite the attempt to monetise GPT-3.5 and GPT-4, the company is not able to generate enough revenue to break even at this point.
ChatGPT became the fastest-growing app in history after its launch in November 2022. But after a record-breaking influx of users during their early stages, the company is seeing a gradual decline in user engagement over recent months. Data by SimilarWeb says that by July end the user base of ChatGPT dropped even further.
July 2023 witnessed a 12 per cent reduction in the user base compared to June, plummeting from 1.7 billion users to 1.5 billion users, SimilarWeb data said.
The company’s APIs are also part of the problem. The report says that several companies previously discouraged their employees from using ChatGPT, have now begun acquiring access to OpenAI’s APIs, enabling them to create their own AI chatbots for diverse workflows.
Analytics India Magazine’s report emphasizes the problem. It said that there are several open-source LLM models that are free to use and are allowed to be repurposed, without any licensing issues. As a result, they can properly customise and adapted to specific use case scenarios that an organisation might have.
Citing an example, the report said that Meta’s Llama 2, in partnership with Microsoft, is allowing people to use the model for commercial purposes. So, instead of going for what OpenAI offers, which is a paid, proprietary, and restricted version, why would people not go for an easily modifiable Llama 2? Arguably, it is also a lot better in certain use cases when compared to GPT. That is already happening.
The report says that OpenAI is not profitable yet. In May, its losses doubled to $540 million ever since it started developing ChatGPT. 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 stated.
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