Is OpenAI Running Out of Funds?

OpenAI, the company behind the AI chatbot ChatGPT, may be facing significant financial challenges according to a recent report by The Information. The report suggests that the artificial intelligence firm is on track to lose up to $5 billion in 2024.

The analysis, based on undisclosed financial data and insider information, indicates that OpenAI’s expenses are projected to reach astronomical figures. The company is expected to spend approximately $7 billion on AI training and an additional $1.5 billion on staffing in the coming year. 

SCOOP: OpenAI may lose $5B this year & may run out of cash in 12 months, unless they raise more $, per analysis @theinformation.

Investors should ask: What is their moat? Unique tech? What is their route in profitability when Meta is giving away similar tech for free? Do they… pic.twitter.com/i5EkvEFEQd

— Gary Marcus (@GaryMarcus) July 24, 2024

These expenditures are substantially higher than the company’s competitors. In comparison, Anthropic, which runs the chatbot Claude, anticipates a burn rate of $2.7 billion for the same period.

Tech has its own subprime mortgage crisis happening with generative AI. OpenAI burned $4bn this year (so far!) on cloud costs alone, and may spend $3bn+ on model training, with annualized revenues of $3.4bn. This is really bad! This company can't survive!https://t.co/E2ufrrOLBT pic.twitter.com/zwAieVJTjU

— Ed Zitron (@edzitron) July 24, 2024

But that doesn’t mean that the Amazon (Nasdaq: AMZN)-backed firm is doing any better. The Information estimates Anthropic’s revenue to be about a fifth to a tenth of OpenAI’s but it may be losing half as much as OpenAI.

Sounds like things are even worse for Anthropic, who are spending $2.5bn a year on cloud computing costs while making (the Information estimates) one fifth to one tenth of OpenAI's revenue (so $500m to $1bn). Jesus christ! This is a financial crisis!https://t.co/E2ufrrOLBT pic.twitter.com/F0w2Se8Qdc

— Ed Zitron (@edzitron) July 24, 2024

OpenAI’s rapid growth since launching ChatGPT in November 2022 has been accompanied by equally rapid spending. The company has raised over $11 billion through seven funding rounds, but it may still need to secure additional financing within the next 12 months to maintain operations.

Also read: Sam Altman’s Nearly $40-Million Bet: UBI Study Reveals Giving People Free Money Is A Flop

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