More than 5 billion in losses – when will OpenAI run out of money?

ChatGPT is celebrating a rare success story. And it costs a lot of money. Internal financial documents reveal exactly how much.

Celebrated but still with a worried face – OpenAI founder Sam Altman

Justin Sullivan / Staff

With ChatGPT, OpenAI may have achieved the biggest coup in the field of artificial intelligence to date. ChatGPT has shown millions of people that artificial intelligence has become a reality. Demand is gigantic, and in the first half of 2024 alone the company is said to have doubled its annual turnover. So is the company founded by frontman Sam Altman already a commercial success? Behind the scenes, OpenAI is said to be struggling with significant financial challenges: According to a report by The Information, the company could record losses of more than five billion dollars this year, as internal financial documents show.

It is no secret that the operating costs for AI models in particular are gigantic. According to the report, the income from subscriptions for ChatGPT is not enough to cover these. The forecast is accordingly: OpenAI will run out of money in the next twelve months – so capital is urgently needed. Sam Altman has made no secret of the fact that he is looking for it, and wants to raise billions. The gigantic financing round has not yet materialized.

OpenAI boss Altman has not always cut a good figure in the past

Instead, Altman's thirst for capital has also come back to haunt him in the past. At the end of 2023, when OpenAI wanted to raise $300 million from investors, the CEO was reportedly quite bold: In a group video call, he put an offer on the table for a handful of high-profile venture capitalists, including Sequoia, Lightspeed and NEA, that they could either accept or reject, and let them discuss it among themselves.

A VC partner whose firm had previously backed Altman's companies and who attended the call thought he had clicked the wrong link when he found himself at a virtual table with his closest competitors. “I thought, 'This is surreal,'” the investor said. The offer on the table was also unconventional. Any participant could buy into OpenAI at a post-money valuation of $29 billion.

Cost of $700,000 – per day

A major cost factor is the cost of servers and training the AI. The report from The Information reveals how much money OpenAI is burning: According to the report, the company pays around $700,000 a day to run the servers for ChatGPT. These costs rise as the complexity of the models increases and puts a significant strain on the company's finances. OpenAI recently released a slightly more resource-efficient AI model – but this will not be able to significantly reduce operating costs.

AI training and personnel costs are also extremely expensive for OpenAI. According to the report, the company is expected to have spent seven billion dollars on AI training in 2024 alone. This cost block is also unlikely to decline significantly, and obtaining new data is becoming increasingly difficult – and therefore more expensive. In the face of tough competition, OpenAI has quickly recruited talent – with the foreseeable financial result: employee salaries total $1.7 billion.

Does Microsoft play a key role – and Apple?

This means that Altman urgently needs financial support. A possible solution for OpenAI could be another round of financing. Since its founding, the company has already completed seven rounds of financing and received over eleven billion dollars. The company's value has exploded accordingly: OpenAI is currently valued at around 80 billion dollars – which could pose a challenge even for well-known VCs. This means that the main role is likely to lie with the strategic investor Microsoft.

The software company had invested heavily in OpenAI in order to get ahead of competitors such as Google in the AI sector. The search engine operator had built up a technological lead with its subsidiary Deepmind and the products Bard and Gemini and was in danger of outpacing Microsoft. Apple is another major player that will be relying on OpenAI technology in the future. This will bring money into the coffers – but at the same time operating costs will also rise.