The alarm bells are going off at OpenAI.
What was once a healthy lead over its competition thanks to its blockbuster AI chatbot ChatGPT has turned into a razor-thin edge, motivating OpenAI CEO Sam Altman to declare a “code red.”
The financial stakes are almost comical in their magnitude: The company is lighting billions of dollars on fire, with no end in sight; it’s committed to spending well over $1 trillion over the next several years while simultaneously losing a staggering sum each quarter.
And revenues are lagging far behind, with the vast majority of ChatGPT users balking at the idea of paying for a subscription.
Meanwhile, Google has made major strides, quickly catching up with OpenAI’s claimed 800 million or so weekly active ChatGPT users as of September. Worse yet, Google is far better positioned to turn generative AI into a viable business — all while minting a comfortable $30 billion in profit each quarter, as the Washington Post points out.
The question on many investors’ minds: if the AI bubble were to collapse, would OpenAI even survive?
“We’re going to see a situation where ChatGPT was the early winner,” Porter and Co. equity analyst Ross Hendricks told WaPo. “They’re going to end up just like MySpace did with the inability to truly monetize and break away from the pack.”
In a Thursday note, Deutsche Bank analyst Jim Reid estimated staggering losses for OpenAI amounting to $140 billion between 2024 and 2029.
“OpenAI may continue to attract significant funding and could ultimately develop products that generate substantial profits and revolutionize the world,” he wrote, as quoted by WaPo. “But at present, no start-up in history has operated with expected losses on anything approaching this scale.”
“We are firmly in uncharted territory,” Reid added.
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