“People use it much more than we expected.”
Fiscal Shortage
While trying its darndest to become profitable, OpenAI is still falling comically short — which, since it’s the 800-pound gorilla in the nascent AI industry, should probably give pause to its rivals both large and small.
In a post on X-formerly-Twitter, CEO Sam Altman admitted an “insane” fact: that the company is “currently losing money” on ChatGPT Pro subscriptions, which run $200 per month and give users access to its suite of products including its o1 “reasoning” model.
“People use it much more than we expected,” the cofounder wrote, later adding in response to another user that he “personally chose the price and thought we would make some money.”
Though Altman didn’t explicitly say why OpenAI is losing money on these premium subscriptions, the issue almost certainly comes down to the enormous expense of running AI infrastructure: the massive and increasing amounts of electricity needed to power the facilities that power AI, not to mention the cost of building and maintaining those data centers.
Way back in spring 2023, analyst Dylan Patel told The Information that the company was likely spending around $700,000 per day running ChatGPT, or about 36 cents per query; nowadays, a single query on the company’s most advanced models can cost a staggering $1,000.
In other words, there’s an inconvenient reality for anyone in the AI space trying to turn a profit, as OpenAI now is: the smarter these systems get, the more expensive they become to run — which poses a major problem for pricing.
Is This Loss
With around 10 million paying subscribers, that gargantuan overhead means OpenAI is still burning through mountains of cash while chasing the dream of profitability.
Indeed, according to insiders who spoke to CNBC last fall, OpenAI was on track to lose a whopping $5 billion in 2024, which put the company firmly in the red compared to its $3.7 billion in revenue.
To that end, the company’s board of directors sheepishly admitted in an end-of-year blog post that OpenAI needs way more cash than it previously thought — even though it secured $6.6 billion in funding just a few months prior.
“We once again need to raise more capital than we’d imagined,” the governing body wrote. “Investors want to back us but, at this scale of capital, need conventional equity and less structural bespokeness.”
Though there have reportedly been internal talks to raise the price of a regular ChatGPT subscription (which currently costs a more modest $20 per month), that level of pricing increase doesn’t seem like it’ll keep up with the energy demands of powering the behemoth — or the draw of shinier new toys.
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