Get all your news in one place.
100’s of premium titles.
One app.
Start reading
Windows Central
Windows Central
Technology
Kevin Okemwa

OpenAI may endure massive $44 Billion losses before seeing profit in 2029 partly due to Microsoft tie-up: "The partnership with Microsoft might mean OpenAI earns less from each dollar of revenue"

OpenAI Microsoft Best Buy Amazon Walmart Newegg Target (Organization) Dell Sam Altman LG
In this photo illustration OpenAI icon is displayed on a mobile phone screen in Ankara, Turkiye on August 13, 2024.

What you need to know

  • A report suggests OpenAI will lose $44 billion before it becomes profitable in 2029.
  • The reported losses are attributed to the cost of training and running advanced AI models, employee salaries, data, and more.
  • Microsoft will likely get a 20% cut of OpenAI's revenue.

According to The Information, the ChatGPT maker could make $44 billion in losses before potentially becoming profitable in 2029. The report further estimates the company's revenue generation to have scaled $100 billion. The projections are based on the outlet's analysis of OpenAI's financial documents.

The projections also include the hundreds of millions of dollars spent on training and running advanced AI models, employee salaries, acquiring data, and more. While it's essential to take the information with a grain of salt as the company's trajectory may change based on several factors, it paints a picture of how much money goes into funding AI projects and keeping operations running.

OpenAI CEO Sam Altman recently published a blog post highlighting that superintelligence might only be "a few thousand days away," but it'll "take $7 trillion and many years to build 36 semiconductor plants and additional data centers" to bring the vision to fruition. Perhaps more interesting, a former OpenAI researcher corroborated Altman's findings but warned that the AI firm isn't well-equipped to handle all it entailed.

Microsoft is arguably one of OpenAI's most prominent investors, betting $13 billion on the ChatGPT maker. While the tech giant has heavily integrated OpenAI's AI smarts across its tech stack, where does the AI firm's project leave it?

While speaking to Business Insider, Kate Leaman, the chief market analyst at AvaTrade, indicated:

"Developing advanced AI takes a lot of time and money, so it's expected that OpenAI would face high costs before it starts making a profit. The partnership with Microsoft might mean OpenAI earns less from each dollar of revenue, but it could help the business grow significantly in size, meaning the impact may not be as bad as initially anticipated."

The Information details how Microsoft will benefit from its partnership with OpenAI — a tad more than previously thought. According to the analysis, Microsoft will potentially get a 20% cut of OpenAI's revenue stream.

Living beyond our means are we?

OpenAI logo (Image credit: Getty Images | NurPhoto)

Over the past few months, OpenAI has gained broad popularity for frequently featuring in the media. It all started when a report emerged claiming that the ChatGPT maker is on the verge of bankruptcy with projections of $5 billion in losses.

But how did the OpenAI land itself in such a challenging position? The hot startup generates $2 billion annually from ChatGPT and $1 billion from LLM access fees, translating to an approximate total revenue of between $3.5 billion and $4.5 billion annually. However, it spends $7 billion on training its AI models and $1.5 billion on staffing.

Market analysts and experts indicated that the firm needs another round of funding to keep its business afloat. Luckily, it recently raised $6.6 billion from investors, including Microsoft, NVIDIA, Thrive Capital, and more, pushing its market valuation to $157 billion. Apple wiggled its way out of the exercise, potentially indicating it's seeking a unique path focused on privacy and security in the AI landscape.

For context, OpenAI's latest funding round brings the total number of funding rounds the ChatGPT maker has had to 8. While the firm might have evaded bankruptcy, the funding round comes with critical concerns. For instance, the OpenAI needs to transform into a for-profit entity within the next two years or risk returning the money raised by investors.

A separate report claims that investor interest in AI technology might fade, leaving startups invested in the technology with the shorter end of the stick and insufficient funds for their advanced AI projects. This decline could open a can of worms for the ChatGPT maker, including outsider interference and hostile takeovers from investors like Microsoft. Investors raised concern over Microsoft's expenditure on AI projects, citing difficulty establishing a clear path to profitability.

Incidentally, a report recently highlighted that market analysts and experts predict that Microsoft might potentially acquire OpenAI within the next three years as it burns through wads of cash chasing the AI bubble. And as it now seems, OpenAI might not be over the hump just yet. 

🎃The best early Black Friday deals🦃

More Prime Day deals and anti-Prime Day deals

We at Windows Central are scouring the internet for the best Prime Day deals and anti-Prime Day deals, but there are plenty more discounts going on now. Here's where to find more savings:

Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
Gay, Trans People Voicing -- And Sometimes Screaming -- Trump Concerns
At a popular LGBTQ cabaret in San Francisco's South of Market neighborhood, Lisa Frankenstein wasn't about to let the topic of Donald Trump go without mention.
International Business Times
International Business Times
As 4B takes the world by storm, South Korea is grappling with a backlash against feminism
The 4B movement that sparked global interest in the wake of the US election has grown out of an intensely unequal society
The Guardian - AU
The Guardian - AU
New Pentagon report on UFOs includes hundreds of new incidents but no evidence of aliens
A new report from the Pentagon has revealed hundreds of new reports of unidentified aircraft and aerial phenomena, but no indications of extraterrestrial life
The Independent UK
The Independent UK
People are still amazed that Toy Story 4's cobwebs were made by AI spiders
And it's generating a fierce debate.
Creative Bloq
Creative Bloq
One Scrapped 'Deadpool 3' Idea Could Have Made Him MCU Canon
'Deadpool & Wolverine' nearly featured a "deleted scenes extravaganza" that would have retconned the MCU in a major way.
Inverse
Inverse
James Bond: next actor will be in his 30s and ‘whiteness is not a given’
In interview 007 producer Barbara Broccoli says actor who takes on role will offer ‘something new and different’
The Guardian - US
The Guardian - US
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.
Download on the AppStore Get it on Google Play