OpenAI, the artificial intelligence company behind ChatGPT, is anticipating a significant financial loss this year, projecting losses of about $5 billion on revenues of $3.7 billion, according to sources close to the company. Despite the heavy losses, OpenAI's growth trajectory remains steep, with revenue expected to surge to $11.6 billion next year, CNBC confirmed on Friday.
The company's financials, first reported by The New York Times, show explosive growth in revenue, particularly following the launch of its highly popular chatbot, ChatGPT, in late 2022. In just one month, OpenAI reported a 1,700% increase in revenue, generating $300 million in September alone. As OpenAI moves forward, it has set ambitious targets, projecting over $11 billion in revenue in 2024, a leap from this year's expected $3.7 billion.
OpenAI is currently raising a substantial funding round, aiming to close the deal by the end of next week. The round, led by Thrive Capital with a planned investment of $1 billion, is expected to value the company at $150 billion. Additional investors include Tiger Global, Microsoft, Apple, Nvidia, and Khosla Ventures. Thrive Capital's $1.2 billion contribution comes from a mix of its own fund and a special purpose vehicle designed for smaller investors, sources revealed. Notably, Thrive has secured a unique option to invest another $1 billion next year at the same valuation, provided OpenAI hits certain revenue goals.
The projected losses, reported at around $5 billion this year, stem largely from operational expenses tied to maintaining and running its sophisticated AI models. The increasing demand for computational power, particularly the GPUs supplied by Nvidia, has contributed significantly to the company's rising costs. Alongside these technical expenditures, the losses also reflect salaries, office rent, and other operational expenses. The Times cited an analysis showing these costs do not include equity-based compensation, hinting at additional, unexplained financial burdens.
OpenAI's transformation from a non-profit research lab into a revenue-generating powerhouse has attracted substantial attention from the technology and investment communities. The company's meteoric rise in valuation, driven by the success of its generative AI products, has cemented its position as one of the most valuable private tech companies in the world. However, there are discussions about restructuring the firm to simplify the investment process and allow for more direct returns for investors. The restructuring would split the company into a for-profit segment, leaving a separate non-profit entity intact.
The AI firm's impressive growth has been fueled by sales of AI-powered services and subscriptions. OpenAI's GPT models, including the well-known ChatGPT, have been widely adopted by both corporate clients and individual users. The company's primary revenue source has been subscription fees, with ChatGPT alone projected to bring in $2.7 billion this year. The chatbot service has seen rapid uptake, with around 10 million paying users currently subscribed to its $20-per-month premium service.
CEO Sam Altman had initially projected OpenAI's revenue for this year at around $1 billion. However, the company has vastly exceeded those expectations, benefiting from its continued rollout of new AI tools and services. Major corporations, including Microsoft and Nvidia, have contributed to OpenAI's rapid growth by incorporating its technology into their own products, further expanding the company's reach.
Despite the financial hurdles, OpenAI's value in the AI sector remains robust, and investors are optimistic about the future. With its cutting-edge technology and growing customer base, OpenAI is positioned to dominate the AI market in the coming years. Thrive Capital's exclusive investment deal underscores the confidence top investors have in OpenAI's potential to meet its ambitious revenue targets.
