ChatGPT could drive OpenAI to bankruptcy, new report claims

OpenAI, the company behind the popular language model ChatGPT, is facing financial turmoil as it spends approximately $700,000 per day to operate its AI system.

Recent investors like Microsoft are shouldering these costs, but concerns are mounting that they might pull the plug if the company doesn't turn a profit soon. According to a report published in Analytics India Magazine, this could lead to the company's potential bankruptcy by the end of 2024.

Microsoft's substantial $10 billion investment in OpenAI has been crucial in keeping the company afloat for now. However, the report points out that OpenAI's projected annual revenue of $200 million for 2023 and the ambitious goal of reaching $1 billion in 2024 seem unlikely given the mounting losses. The company's finances have been under strain, with losses doubling to $540 million since the inception of the ChatGPT project.

The report draws attention to the diminishing user engagement on the ChatGPT website. SimilarWeb's data reveals a decline in user visits from the peak of 1.9 billion in May to 1.7 billion in June and further down to 1.5 billion in July. One factor contributing to this decline, the report suggests, is the phenomenon of API cannibalisation. Many companies are opting to restrict employees from using the ChatGPT chatbot for work, instead favoring the use of the API to integrate the language model into other workflows.

The report challenges OpenAI's assumption that the drop in user engagement is solely due to the shift toward API usage. It highlights the emergence of open source Large Language Model (LLM) models, notably Meta's Llama 2 in collaboration with Microsoft, which allows commercial utilisation of the model. This poses a threat to OpenAI's paid, proprietary offering, as users are drawn towards easily customisable alternatives like Llama 2.

OpenAI's CEO, Sam Altman, has highlighted the company's struggle with the shortage of graphics processing units (GPUs), impacting their ability to enhance and develop new models. Adding to the challenges is the competition from Tesla CEO Elon Musk, who is working on a rival chatbot named 'TruthGPT'. Musk's acquisition of 10,000 NVIDIA GPUs for his project underscores his commitment to outpacing OpenAI in the AI race.

OpenAI's transition to a paid version of its services may have generated revenue, but the report deems the financial figures surrounding this move as unclear. Despite this, the report suggests that if OpenAI goes public with a focus on Large Language Models, it could be a prime target for acquisition by larger companies, potentially serving as an exit strategy for its investors.