NEW YORK - OpenAI, the creator of ChatGPT, is facing a dire financial situation, with reports suggesting that the company might face bankruptcy by the end of 2024 if it fails to secure additional funding promptly.

Media sources have highlighted the concerning trajectory, painting a challenging picture for the pioneering AI company.

Analytics India Magazine recently disclosed that ChatGPT’s online platform has experienced a consistent decline in user engagement during the initial half of this year.

Declining user base

The once-vibrant user base has dwindled steadily, with July’s user count slumping to 1.5 billion compared to 1.7 billion in June and 1.9 billion in May, based on data provided by SimilarWeb, a prominent analytics company.

These figures exclude ChatGPT’s APIs and the mobile application.

While various theories have been put forth to explain this decline, two stand out. One hypothesis suggests that the reduced usage in May could be attributed to students being out of school.

Another perspective suggests that users have been shifting towards building their own chatbot models instead of relying on the original ChatGPT offering.

A user took to Twitter to share their experience, stating, “I am no longer allowed to use ChatGPT at work, but we have developed our own internal model based on ChatGPT.”

ChatGPT’s high costs impact OpenAI

OpenAI’s struggles are further compounded by significant financial losses.

After the introduction of ChatGPT, which has sparked concerns over its potential to replace human creativity in various job markets, OpenAI’s losses have reportedly surged to approximately $540 million in the previous year, as indicated by a report from The Information in May.

Ironically, the operational costs of ChatGPT remain staggering. The model incurs a daily expenditure of around $700,000, making it a high-cost endeavour to maintain.

Even OpenAI’s CEO, Sam Altman, acknowledged the financial strain, conceding in a tweet that “compute costs are eye-watering.”

A recent report from Investopedia has cast doubts on the timing of an initial public offering (IPO) for AI-focused companies like OpenAI, Anthropic, and Inflection.

The report posits that these companies are far from ready to enter the IPO market, citing the need for a minimum of a decade of operation and $100 million in revenue to ensure a successful IPO.

The stakes are raised further as billionaire entrepreneur Elon Musk joins the scene, claiming to be developing a rival chatbot.

While OpenAI has projected a 2023 annual revenue of $200 million and aims to reach a milestone of $1 billion in 2024, the reality remains grim, with mounting losses.

The company’s survival is heavily dependent on the substantial investment of $10 billion from Microsoft.

The cost of operating ChatGPT is about $700,000 a day.