OpenAI may be spending roughly twice as much money as it’s bringing in, a sign of the financial pressures of blazing the trail in commercial applications of AI.
What’s new: OpenAI’s operating expenses could amount to $8.5 billion in 2024, according to an estimate by The Information based on anonymous sources. Meanwhile, its annual revenue is shaping up to be around $3.5 billion to $4.5 billion, putting it on course to lose between $4 billion and $5 billion this year.
Revenue versus expenses: The report combined previous reporting with new information from people “with direct knowledge” of OpenAI’s finances and its relationship with Microsoft, which provides computing power for GPT-4o, ChatGPT, and other OpenAI products.
- Inference cost: This year, OpenAI is likely to spend around $4 billion on processing power supplied by Microsoft, according to a person who is familiar with the compute cluster allocated to OpenAI’s inference workloads. Microsoft charges OpenAI around $10.30 per hour per eight-GPU server, compared to its public pricing between $13.64 (on a three-year plan) and $27.20 (pay as you go) per hour per server.
- Training cost: OpenAI expects to spend $3 billion this year on training models and data, according to a person who has knowledge of the costs.
- Personnel cost: The Information estimates that OpenAI has 1,500 employees. It “guesstimates” the cost at $1.5 billion including equity compensation, based on an OpenAI source and open job listings.
- Revenue: OpenAI’s annualized monthly revenue was $3.4 billion in June. This includes sales of ChatGPT, which are likely to amount to $2 billion this year, and API calls, which accounted for annualized monthly revenue of $1 billion in March.
Why it matters: ChatGPT famously grew at an extraordinary pace in 2023 when the number of visits ballooned to 100 million within two months of the service’s launch. OpenAI’s internal sales team turned that enthusiasm into fast-growing revenue, reportedly outpacing even Microsoft’s sales of OpenAI services. Yet that growth rests on top-performance AI models, which are expensive to develop, train, and run.
We’re thinking: OpenAI is a costly undertaking: OpenAI CEO Sam Altman said it would be “the most capital-intensive startup in Silicon Valley history.” But generative AI is evolving quickly. With OpenAI’s revenue rising, its models becoming more cost-effective (witness GPT-4o mini), and the cost of inference falling, we wouldn’t bet against it.