OpenAI Internal Projections Reveal High Risks and Ambitious Growth Plans
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Internal Projections Reveal High Risks for OpenAI Investors
OpenAI's internal financial projections reveal an aggressive growth strategy coupled with massive losses and a heavy reliance on partners like Microsoft, according to documents reviewed by The Information.
Rapid Growth with High Losses Expected
The AI company aims to increase revenue to $100 billion by 2029, a hundredfold increase from 2023. However, OpenAI does not expect to be profitable before 2029. Losses could triple to $14 billion by 2026, excluding stock-based compensation, The Information reported, citing an "analysis of data from OpenAI financial documents."
Enormous Financial Needs for AI Development
OpenAI burned through $340 million in the first half of 2024, leaving $1 billion in cash on hand before its last funding round. The company projects a loss of $44 billion between 2023 and 2028.
Training and operating AI models will account for 60-80% of expenses. For 2026 alone, OpenAI expects training costs of $10 billion, plus $5 billion for research. Anthropic CEO Dario Amodei also predicted AI training costs of up to $10 billion for 2026.
OpenAI's gross margin of 41% is well below the industry average of over 65% for cloud software startups. The company aims to increase this to 67% by 2028.
ChatGPT as the Main Revenue Driver
OpenAI expects ChatGPT to remain its primary revenue driver, far surpassing API sales to developers. ChatGPT pricing could double by 2029. New offerings like video generation and robotics software could surpass API sales by the end of 2025, generating nearly $2 billion in revenue.
The projections suggest that OpenAI will continue to try to cover as many AI applications as possible internally, making ChatGPT central to much of office work. CEO Sam Altman has warned that AI startups without clear differentiation from OpenAI's products could be "run over" by the company's model progress.
Rising Personnel Costs, Falling Data Costs
Personnel costs are expected to rise from $700 million in 2024 to $2 billion in 2025. Interestingly, OpenAI expects data costs to fall, suggesting less reliance on external data sources.
The company has signed numerous media licensing agreements, mainly to integrate current content into its planned product SearchGPT, which will become part of ChatGPT once completed.
Uncertainty about Future Costs
Computing costs remain unclear. Microsoft appears to be offsetting some cloud costs with investments through credits. OpenAI also plans to invest in data centers and custom AI chips, which may incur costs not yet fully reflected in these projections.
Conclusion
OpenAI's ambitious growth plans come with significant financial risks. It remains to be seen whether the high investments in AI development and infrastructure will pay off in the long run. The heavy reliance on ChatGPT and uncertain cost developments pose potential risks for investors.
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