Why ChatGPT is going bankrupt?

OpenAI, the artificial intelligence research startup backed by Microsoft, is reportedly facing a potential financial crisis. The company, known for its AI chatbot, ChatGPT, might go bankrupt by the end of 2024.

OpenAI’s ChatGPT faces Bankruptcy

ChatGPT, which became synonymous with generative AI-related tech shortly after its launch, reportedly costs around $700,000 (Rs 5.80 crore) per day to operate. This expense is currently being underwritten by recent investors, including Microsoft. However, if the venture does not become profitable soon, these investors’ resources might eventually be depleted.

Despite efforts to monetize GPT-3.5 and GPT-4, OpenAI has yet to achieve a revenue level that covers its costs. The company initially experienced a robust launch with a record-breaking influx of users, but it has observed a gradual decline in user engagement over recent months.

According to SimilarWeb data, July 2023 witnessed a 12 per cent reduction in the user base compared to June, plummeting from 1.7 billion users to 1.5 billion users.

OpenAI’s APIs also contribute to the predicament. Numerous companies, previously apprehensive about their employees using ChatGPT, have now begun acquiring access to OpenAI’s APIs. This enables them to construct their own AI chatbots for diverse workflows.

However, the problem arises when numerous open-source large language model (LLM) frameworks become available for free utilization and repurposing, without any licensing constraints to encounter. Consequently, organizations can meticulously tailor and adapt these frameworks to cater to their highly specific use cases.

OpenAI faces financial challenges

In December 2022, a few months after its launch, OpenAI CEO Sam Altman acknowledged the astronomical costs associated with operating the AI company and ChatGPT. This prompted the decision to implement monetization strategies. Despite this, the company is rapidly depleting its financial resources.

Even though OpenAI expects to reach $1 billion in 2024, it is Microsoft’s $10 billion investment that is keeping the company afloat. OpenAI’s shift to a paid version, however, would have helped the company make a profit along with the revenue coming from APIs and using the GPT -4-based chatbot.

The future of OpenAI and ChatGPT hangs in the balance as the company edges closer to bankruptcy. The venture is hardly making any profits due to a shortage of chips, divided interests, and more. OpenAI has already seen a $540 million loss since debuting ChatGPT3.

The situation underscores the challenges faced by AI companies in balancing the high costs of developing and maintaining advanced AI systems with the need to generate sufficient revenue to sustain operations. As OpenAI navigates this financial crisis, the future of ChatGPT remains uncertain.

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