Sam Altman-led OpenAI is projected to rack up bills worth at least $8.5 billion, a new report has said, sparking renewed rumours the Microsoft-backed startup could be headed for bankruptcy.
The company is expected to spend at least $7 billion through the year to fund its current artificial intelligence models, according to an analysis by The Information.
OpenAI is likely to spend around $4 billion of those costs on renting server capacity from Microsoft to run ChatGPT and related large-language models, The Information said.
Also on AF: AI is ‘Effectively Useless,’ Veteran Analyst Warns
It said the other $3 billion of those projected costs would go to funding training costs for its AI models. These include deals with news publishers like News Corp to use their copyrighted content to train OpenAI’s generative artificial intelligence models.
Aside from these, the wage bill at OpenAI is also likely to amount to at least $1.5 billion for the year, The Information said. The company currently employs about 1,500 people, it said.
The report cited ‘previously undisclosed data and interviews with people associated with the business’, as the basis for its analysis.
Meanwhile, OpenAI’s revenues from ChatGPT and other fee-based large-language models will likely be between $3.5 billion and $4.5 billion for the year, the report said.
Effectively, the firm was on track to lose at least $5 billion for the year and would likely need to raise cash within the next year, it said.
The losses OpenAI has allegedly accumulated will far outweigh its competitors, if true. Google-backed Anthropic said earlier this year it would burn more than $2.7 billion this year.
Bankruptcy concerns
The Information’s report triggered widespread speculation around the future of OpenAI, with multiple reports suggesting the losses may have the potential to send the company bankrupt, despite Microsoft’s deep pockets.
Some AI experts, such as Wharton Professor Ethan Mollick and Abacus.AI CEO Bindu Reddy have rejected those claims, but others have raised questions around OpenAI’s business model.
“What is their route in profitability when Meta is giving away similar tech for free? Do they have a killer app? Will the tech ever be reliable? What is real and what is just demo?” AI researcher Gary Marcus posted on X.
Marcus was referring to Llama 3.1, an open-source AI model unveiled by Mark Zuckerberg’s Meta last week.
Open source means software developers can access the model’s code for free. And such a model could pose challenges for OpenAI, which has so far remained an AI leader on the back of ChatGPT.
A free-to-use model could prove to be a significant competitor to OpenAI, given businesses around the world have slowed down their use of GenAI due to concerns over ‘dismal returns’ and inaccurate responses — or ‘hallucinations’.
Microsoft in play
This is not the first time rumours have flown about OpenAI possibly going bankrupt. Similar speculation spread through the industry in August last year following a report that said running ChatGPT was costing OpenAI nearly $700,000 per day.
But given OpenAI has big backers like Microsoft and Sequoia, a bankruptcy may not occur.
OpenAI has, since 2015, raised more than $11.3 billion in seven rounds of funding, according to startup tracker Tracxn. The company had a post-money valuation of about $80 billion as of February this year.
Tech giant Microsoft has also invested a total of $13 billion in OpenAI, although much of that is in the form of cloud compute purchases, and not cash.
Microsoft chief Satya Nadella has previously said that investment has given his firm significant rights over OpenAI’s technologies.
“If OpenAI disappeared tomorrow, I don’t want any customer of ours to be worried about it, quite honestly, because we have all of the rights to continue the innovation,” Nadella told veteran tech journalist Kara Swisher last year.
“We are below them, above them, around them.”
AGI ambitions
While ChatGPT remains the biggest money-maker for OpenAI, the wildly popular GenAI chatbot accounts for the largest chunk of its resources. Of OpenAI’s 350,000 servers, about 290,000 are dedicated to ChatGPT, The Information said, adding that company’s hardware was “at near-full capacity.”
Despite those concerns, however, OpenAI has unveiled a host of new products include the AI-powered video generator Sora and AI search engine SearchGPT. The search engine’s unveiling last week triggered a 3% sell-off in Google parent Alphabet’s shares.
OpenAI chief Altman has also maintained he would continue to push for the development of artificial general intelligence (AGI) regardless of the losses his company faces. OpenAI defines AGI as autonomous systems that surpass humans in most economically valuable tasks.
In a talk at Stanford in May, Altman said: “Whether we burn $500 million, $5 billion, or $50 billion a year, I don’t care… “We are making AGI, and it is going to be expensive and totally worth it.”
- Vishakha Saxena
Also read:
Job Loss Fears, Costs See 40% of Japanese Firms Shunning AI
Warren Buffett Likens AI to the Atomic Bomb — Quartz
AI Could up Profits But Also Disrupt Banking: Citi Report – M’place
China Far Ahead of the US in Generative AI Patents
Returns From AI Projects ‘Dismal’, Survey Finds – Register
Generative AI Seen Having Big Impacts on Environment – Nature
AI Hitting Job Markets Like a ‘Tsunami’, Says IMF Chief
Fears Rising on Impacts From Unrestrained AI Projects
Microsoft Dismisses Dangerous AI Worry, Says Tech Decades Away
OpenAI’s ‘Strawberry’ Model Would Be Capable of ‘Deep Research’
Microsoft in Mega Carbon Deal as AI Power Demands Surge – FT
OpenAI Investigating ‘Lazy’ ChatGPT Claims – Independent
