OpenAI on verge of bankruptcy & heading for $5 billion in losses: Report

OpenAI could lose as much as $5 billion in 2024, putting the startup at risk of bankruptcy within 12 months, according to a report.

The Sam Altman-led company is spending more cash than it should and that could force it to bankruptcy if it doesn’t get more funding within 12 months, reported The Information.

OpenAI is on track to spend about $7 billion on AI training and another $1.5 billion on staffing, claims the report, citing undisclosed financial data and insiders. This spending is way higher than competitors like Amazon-backed Anthropic, which expects a 2024 burn rate of $2.7 billion.

These expenses could force the company to close on yet another financing round within 12 months to stay afloat, said the report.

OpenAI is a costly business. Its AI chatbot, ChatGPT, costs $694,444 per day to operate in computer hardware costs alone, according to a Semianalysis report. This number would be much higher if you take the operations costs, R&D, and staffing expenses into account.

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

OpenAI generates about $2 billion in annual revenue, while investors have valued the San Francisco startup at over $80 billion. Financial Times reported that the company is confident it can more than double this revenue in 2025, thanks to strong interest from business customers looking to implement its generative AI tools in the workplace.

While The Information’s report about OpenAI’s losses might be correct, it’s unlikely that the company will go bankrupt just yet. With backers like Microsoft and Sequoia, the company will likely secure funding during the next seeding round.

Despite predicted losses, OpenAI continues to expand. Earlier this week, it announced its own AI-powered search engine, challenging Google. SearchGPT is currently limited to 10,000 users, but it will see a wider rollout soon.