OpenAI’s ChatGPT made history as the fastest-growing app ever upon its launch in November 2022. However, a recent news report by Analytics India Magazine has raised concerns about the company’s financial future, suggesting that it might face bankruptcy by the end of 2024.
According to the report, OpenAI’s decision to apply for a trademark on GPT led to apprehensions about its viability, with predictions that users might eventually discontinue its usage. The report highlighted a decline in ChatGPT’s user base during June and July compared to May. SimilarWeb data on August 3 revealed a second consecutive drop in ChatGPT traffic, with a 9.6 per cent decrease in July and a 9.7 per cent decline in June. Notably, July witnessed a 12 per cent decrease in users, dropping to 1.5 billion from June’s 1.7 billion.
The report attributed this decline partly to API cannibalszation, as companies prohibited their employees from using ChatGPT for work purposes but allowed integration of the large language model (LLM) into other workflows.
Media sources indicate that running ChatGPT costs OpenAI approximately $700,000 per day, and while recent investors like Microsoft cover these expenses, sustaining such costs without profits could be detrimental.
Earlier losses of $540 million for 2023 doubled since OpenAI’s chatbot development began, projecting $200 million in revenue for 2023 and an ambitious $1 billion in 2024. However, mounting losses cast doubt on achieving these targets. Challenges stemming from persistent Graphics Processing Unit (GPU) shortages also hindered model development.
OpenAI’s recent trademark application for ‘GPT-5’ and its ongoing model training efforts signify the company’s dedication to advancing in this domain. Despite these efforts, the report suggests that OpenAI might be on the verge of bankruptcy by the end of 2024 unless it secures additional funds promptly.
In the midst of these developments, Apple’s potential entry into the AI-powered chatbot arena and Elon Musk’s claims about his AI company xAI being superior have added to OpenAI’s challenges. Musk, a co-founder of OpenAI, criticised the company for its affiliation with Microsoft and its approach to AI development.
OpenAI, once a nonprofit, has evolved into a “capped-profit” entity, raising $10 billion from Microsoft to fund its growth while attempting to balance its original non-profit mission. The chief executive Sam Altman has said that the company has no immediate plans to go public due to concerns about superintelligence-related decisions aligning with investor expectations.