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Experts warn of bankruptcy due to ChatGPT’s high fixed costs

Experts warn of bankruptcy due to ChatGPT’s high fixed costs

the India Analytics Journal Reports indicate that OpenAI may be on the verge of bankruptcy by the fourth quarter of 2024. This was the result of an analysis.

CEO Sam Altman has already mentioned ChatGPT’s high operating costs in December 2022. According to media reports, the daily costs in 2023 will already be 700 thousand US dollars. The chatbot is also not profitable yet.

OpenAI: Losses already over 500 million USD

As of May of this year, OpenAI’s losses have doubled to $540 million. According to experts, Microsoft’s investment of ten billion dollars is currently helping, but it is not clear how long it will be possible to stay afloat.

Meanwhile, OpenAI is struggling with a decline in the number of users. ChatGPT has a loud voice similarweb The number of users is twelve percent less in one month: from June to July, there was a decrease from 1.7 billion to 1.5 billion users.

The company itself explains that the decrease is related to school holidays. Pupils will use the services less for the time being.

Meanwhile, there is speculation as to whether the decline could also have something to do with some kind of cannibalism. Since OpenAI has made ChatGPT publicly available, more and more companies and users have built their own bots on top of it using the ChatGPT API, so they no longer have to use ChatGPT directly. Since the use of ChatGPT is now banned in many companies anyway, this effect may have increased.

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ChatGPT: Open Source LLM Models as Competition

Analytics India Magazine writes that it is “understandable” by OpenAI to assume that user numbers are declining because people have developed their own LLM using the API. The emergence of open source LLM, for example, is a reference. For example, Meta Llama 2, which was created in partnership with Microsoft, allows people to use the template for commercial purposes.

“So why not opt ​​for the easily modifiable Llama 2 instead of what OpenAI has to offer, i.e. a paid, protected, and restricted version?” Analytics India Magazine concludes.

The analysis also notes that while CEO Sam Altman does not own any shares in OpenAI, the company has long since transitioned from a nonprofit to a for-profit organization. So while Altman doesn’t gain anything from OpenAI itself, the company does have an interest in being in the black.

Is it still too early to go public?

A recent report from Investopedia It also indicates that the IPO is still early. According to the financial media website, an initial public offering (IPO) is promising only after at least ten years of operation and $100 million in sales.

Microsoft’s huge financial injections help in these months not to lose ground under their feet. However, the company’s goals for 2023 and 2024 do not look very realistic due to current losses. OpenAI has projected annual sales of $200 million for 2023 and expects it to reach $1 billion in 2024.