UPDATED 13:52 EST / MAY 05 2023

AI

Report: OpenAI weighs raising more funding after losses doubled in 2022

OpenAI LP is weighing to raise more funding after its losses doubled to $540 million last year, according to a new report.

The Information reported the development on Thursday, citing three people familiar with the matter. 

One factor seen as a contributor to OpenAI’s 2022 loss was its efforts to hire artificial intelligence engineers from Google LLC. In February, it was reported that the startup had recruited more than 50 Google machine learning experts. It’s believed that it has also hired dozens of former Meta Platforms Inc. employees.

Another reported contributor to the loss the startup logged last year was the steep cost associated with training its AI models. Moreover, it’s believed that the popularity of ChatGPT could further increase OpenAI’s expenses. Hosting ChatGPT, which passed 100 million two months after its release, likely requires a significant amount of infrastructure.

According to an estimate from research firm SemiAnalysis that was cited by The Information, ChatGPT may cost OpenAI as much as $700,000 per day. Earlier, Google LLC indicated that there are significant costs associated with Bart, its ChatGPT rival. John Hennessy, chairman of Google parent Alphabet Inc., has reportedly stated that processing a Bart query costs 10 times as much as a standard search.

To cover its costs, OpenAI is said to have floated the possibility of raising more funding. Chief Executive Officer Sam Altman has reportedly suggested that the startup may seek to raise $100 billion in additional funding over the next few years. The goal, Altman was cited as saying, is to develop an AI system that can autonomously improve its own capabilities.

The additional funding would come on top of the billions of dollars OpenAI has raised since its launch. The startup was founded in 2015 as a nonprofit with more than $1 billion worth of initial funding. It later restructured as a for-profit company and secured a $1 billion investment from Microsoft Corp in 2019.

According to recent reports, OpenAI has since raised another $12 billion from Microsoft in two tranches. It’s believed it received $2 billion in 2021 and another $10 billion as part of the partnership the companies announced in January. Additionally, Microsoft has agreed to provide it with access to AI infrastructure in Azure.

OpenAI plans to recoup the investment by selling commercial versions of its AI models. The startup already offers ChatGPT Plus, a paid version of ChatGPT that offers faster response times and other features. Last month, it announced plans to introduce a second commercial chatbot service that will be geared towards businesses. 

According to The Information’s sources, OpenAI’s revenue run rate reached “hundreds of millions of dollars” just weeks after the launch of ChatGPT Plus. Earlier, Reuters reported that the startup expects to generate $200 million in revenue this year. That number is projected to reach $1 billion by 2024.

Image: OpenAI

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