News Update

Staggering Daily Cost of Rs 5.80 Crore for ChatGPT Sparks Bankruptcy Concerns by 2024: Report

• ByStartupStory     |    August 13, 2023

OpenAI, the AI research organization led by Sam Altman, is reportedly facing potential financial difficulties, according to a report by Analytics India Magazine. The report suggests that OpenAI might face bankruptcy by the end of 2024.

The report highlights that running just one of its AI services, ChatGPT, costs OpenAI around $700,000 (approximately Rs 5.80 crore) per day. Despite efforts to monetize models like GPT-3.5 and GPT-4, the company is struggling to generate sufficient revenue to cover its expenses.

ChatGPT experienced rapid growth after its launch in November 2022, becoming the fastest-growing app in history. However, the company has recently witnessed a decline in user engagement. SimilarWeb data indicates a 12 percent reduction in the user base of ChatGPT from June to July 2023, dropping from 1.7 billion users to 1.5 billion users.

OpenAI’s APIs are also contributing to the challenge. Several companies that initially discouraged employees from using ChatGPT have now gained access to OpenAI’s APIs, allowing them to develop their own AI chatbots tailored to specific workflows.

The report points out that various open-source language model (LLM) models are available for free use and can be customized without licensing issues. These models can be adapted to specific organizational needs.

For instance, Meta’s Llama 2, in collaboration with Microsoft, permits commercial use of the model. This has led organizations to consider using customizable Llama 2 over OpenAI’s paid, proprietary, and restricted version, especially when it’s more suitable for certain use cases.

The report underscores that OpenAI has yet to become profitable. Despite a $10 billion investment from Microsoft, OpenAI’s losses have doubled to $540 million since the development of ChatGPT began. OpenAI’s projection of achieving an annual revenue of $200 million in 2023 and $1 billion in 2024 appears challenging due to the mounting losses.

In summary, OpenAI is facing financial challenges due to the high operational costs of its AI services, declining user engagement, competition from open-source alternatives, and losses that have yet to be offset by projected revenue.

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