OpenAI’s current business model is ‘untenable’ — Report

Technology commentator Edward Zitron claims OpenAI will need to make several changes to "survive" beyond two years, but some industry executives disagree.

ChatGPT maker OpenAI’s current business model is unsustainable because of its lack of clear path to profitability and its excessively spending, claims technology commentator Edward Zitron. However, several industry executives disagree.

“I ultimately believe that OpenAI in its current form is untenable,” Zitron declared in his most recent “Where’s Your Ed At?” newsletter. It follows recent reports that OpenAI could lose as much as $5 billion in 2024, putting the company at risk of running out of cash within 12 months.

Zitron asserted that for OpenAI to “survive” beyond 2026, it will need to secure more funding than any startup in the history has ever raised and keep raising it continuously.

Additionally, he claimed that OpenAI must achieve a major technological breakthrough to drastically lower the costs of developing GPT.

“Have a significant technological breakthrough such that it reduces the costs of building and operating GPT — or whatever model that succeeds it — by a factor of thousands of percent,” he stated.

He also argued that OpenAI’s use cases need to both create new jobs and automate existing ones to justify the “massive” capital and infrastructure investments required to move forward.

LA Times columnist Brian Merchant echoed a similar sentiment in a July 25 X post that “generative AI is intensely expensive to train and run, and OpenAI is probably gonna have to raise more money this year to stay afloat.”

Industry execs disagree

However, not everyone in the industry believes that OpenAI is at risk of bankruptcy.

“OpenAI has changed the world forever and will NEVER go bankrupt!,” Abacus.AI CEO Bindu Reddy wrote in a July 29 X post.

Meanwhile, Ather Energy CEO Tarun Mehta shut down the OpenAI possible bankruptcy rumors when they first emerged in August 2023.

“Uber at its peak was burning 10X more capital for YEARS,” Metha wrote in an August 2023 X post, arguing that OpenAI is “perhaps” one of the most important startups in recent times.

“They will be fine folks,” he added.

Related: OpenAI reportedly considering shift to for-profit as CEO stacks board

In a positive development for OpenAI, Elon Musk withdrew his lawsuit against OpenAI and its CEO, Sam Altman, on June 12. The lawsuit had accused the AI company of straying from its original mission to develop AI for the benefit of humanity rather than for profit.

On Feb. 29, Musk sued OpenAI and Sam Altman for breach of contract, alleging that the ChatGPT creator strayed from its original mission to develop large language models for the “benefit of humanity, not profit.”

Cointelegraph reached out to OpenAI for comment, but did not receive a response by time of publication.