OpenAI Will Reportedly Lose $5 Billion This Year. Without Investment, It’s Impossible to Sustain the Ruinous AI Business

OpenAI has recently emerged as one of the fastest-growing companies, but there’s a catch. Despite its rapid growth, the company is also spending money at an astonishing rate, and its rapid expansion in the field of artificial intelligence comes with a hefty price tag. In fact, this financial strain could potentially lead the company into financial trouble. Although many expect CEO Sam Altman to generate more income, time may not be on his side.

$5 billion in losses. This figure is staggering. According to The Information, the creator of ChatGPT is reportedly projected to incur approximately $5 billion in losses this year, based on internal financial analysis.

It’s important to note that OpenAI isn’t entirely unprofitable. In fact, its revenues are increasing rapidly and are already reaching around $3.4 billion per year, according to the same source.

However, the costs associated with training the AI amount to $7 billion, and when combined with about $1.5 billion in personnel and infrastructure expenses, it could result in OpenAI ending the year at a significant financial deficit.

12 months to find new investment or face bankruptcy. At this rate of losses, estimates state that OpenAI will run out of cash to keep going within a year.

To date, the company has raised about $11.3 billion, primarily from Microsoft, and was valued at $80 billion in February 2024.

No further support from Microsoft and a lot of work ahead. While Microsoft teamed up with OpenAI, the tech giant has already made it clear this year that it intends to be at the forefront of the AI battle on its own account. Microsoft is reportedly not planning to make such a large investment in OpenAI again.

Altman’s company is spending a lot because it’s working on new, more advanced models. One example is Project Strawberry, with no estimated launch date yet.

Comparatively, spending is rapidly increasing. OpenAI spent $540 million in 2023, double the amount from 2022. However, spending on training artificial intelligence is expected to increase tenfold in 2024, reflecting the company’s ambitious goals.

Meanwhile, one of its competitors, Anthropic, an AI company funded by Amazon, is projected to spend around $2.7 billion by 2024, according to The Information.

A formidable competitor with significantly more financial resources has emerged: Meta. While OpenAI has established itself as a leader in AI, its rivals are making significant progress. Unlike OpenAI, these competitors have substantially larger financial backing.

These competitors include Google and Meta. For instance, with the release of Llama 3.1, Mark Zuckerberg’s company is closer to GPT-4o than ever. Moreover, its capacity to invest in GPUs is considerably greater.

OpenAI is expected to spend around $5 billion this year, whereas Meta reportedly plans to allocate up to $40 billion for AI development, according to The New York Times. These staggering figures will likely fall short in the coming years.

This article was written by Enrique Pérez and originally published in Spanish on Xataka.

Image | Focal Foto

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