Why the entire artificial intelligence market depends on OpenAI's success

Less than three years after the launch of ChatGPT, OpenAI has become one of the most talked-about companies in Silicon Valley. The startup spends tens of billions of dollars annually, operates at a loss, but continues to increase investments, betting that global demand for artificial intelligence will grow fast enough to justify these expenditures. OpenAI forecasts $100 billion in revenue by 2028, but expects profitability only in 2029.

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Ambitious Investments

Over the past nine months, OpenAI has signed contracts and invested amounts that, in scale, surpass most technology startups:

— a $60 billion annual contract with Oracle for computing power rental
— $18 billion in investments for co-building data centers
— $10 billion for developing its own semiconductors
— development of its own hardware device for the mass market.

These deals have locked OpenAI into financial commitments worth hundreds of billions of dollars over the next decade. Just last week, the market capitalization of Broadcom and Oracle rose by $400 billion, and Larry Ellison became the richest person in the world.

Losses Today, Profits Tomorrow

Despite record growth in ChatGPT's user base, which has exceeded 700 million users, OpenAI continues to operate with multi-billion dollar losses.

According to The Wall Street Journal, the company expects $13 billion in revenue this year, but internal forecasts indicate that losses will persist until the end of the decade. Sam Altman informed investors that OpenAI will lose approximately $44 billion by 2029—the year the company expects to become profitable.

Altman compares the current stage of artificial intelligence investment to the dot-com era and warns that not all market participants will survive. Nevertheless, OpenAI forecasts that its revenue will stabilize this year and reach $100 billion by 2028 and $200 billion by 2030.

Question of Market Solvency

The main uncertainty revolves around whether consumers and companies are willing to pay for artificial intelligence. Currently, only about 3% of users pay, generating approximately $12 billion annually. A McKinsey study shows that 8 out of 10 companies that have implemented AI have not yet seen significant profit growth.

The speed at which this situation changes will determine not only OpenAI's future but also the entire artificial intelligence market. If demand fails to meet forecasts, the industry could face a "correction" reminiscent of the dot-com crash of the early 2000s, when only the strongest players survived.

Source: techspot.com