OpenAI: The Next Tech Giant or a New Failure?

The charismatic CEO of OpenAI, Sam Altman (photo; x @QbeepOfficial)

JAKARTA - Three years after ChatGPT made OpenAI a leader in artificial intelligence (AI) and widely known, competitors have narrowed the gap. This makes some investors in the world wonder if this AI sensation has the ability to remain dominant.

OpenAI is expected to close this year with losses of several billion dollars and does not expect to achieve profitability before 2029. This is a very long time in the fast-moving and uncertain world of AI.

Investor Michael Burry, known from the film The Big Short, recently likened OpenAI to Netscape. The browser once dominated the web browser market in the mid-1990s, but later lost to Microsoft's Internet Explorer.

"OpenAI is the next Netscape, doomed and bleeding cash," Burry said recently in a post on X, formerly known as Twitter.

Researcher Gary Marcus, known for being skeptical of AI hype, sees OpenAI having lost the edge it gained with the launch of ChatGPT in November 2022.

"OpenAI has been burning through billions of dollars per month," Marcus said of OpenAI. "Given the signs that have been visible for so long, I can only shake my head as the company falls."

Even so, ChatGPT is a launch of a different technology than others, breaking all records of consumer product growth and now boasting more than 800 million weekly users - both paid and unpaid.

OpenAI's valuation has jumped to $500 billion in a funding round, higher than any other private company.

However, the creator of ChatGPT has committed to paying more than 1.4 trillion US dollars (around Rp21,773 trillion) to computer chip makers and data center builders to build the AI infrastructure it needs.

The burning of such a large amount of cash raises questions, especially since Google claims that around 650 million people use its AI Gemini every month, and the tech giant has massive online advertising revenue to support its technology spending. Competitors such as Amazon, Meta, and Microsoft - who are also OpenAI investors - have deep pockets that the ChatGPT creator cannot match.

OpenAI's charismatic CEO, Sam Altman, showed a rare show of exasperation when asked about the startup's multi-trillion-dollar contract in early November.

Days later, he warned internally that the startup was likely to face a "turbulent environment" and an "unfavorable economic climate," especially given competitive pressures from Google.

When Google released its new model to positive reviews, Altman issued a "red flag," urging the OpenAI team to put their best efforts into ChatGPT.

OpenAI launched its latest ChatGPT model last week, the same day it announced Disney would invest in the startup and license characters for use in the Sora bot and video creation tool.

"OpenAI's challenge is to grow confidence that the vast sums of money they are investing will pay off," said Foundation Capital partner Ashu Garg. For now, OpenAI is raising money at high valuations while the returns on those investments are questionable, Garg added.

However, OpenAI still has the trust of investors with the deepest pockets in the world.

"I always hoped that OpenAI's valuation would go down as competition came and its capital structure was clearly not appropriate," said Espen Robak, president of Pluris Valuation Advisors. "But it seems to just keep increasing."

Opinions are divided on whether this situation will make OpenAI delay becoming a public company or accelerate its move to Wall Street to take advantage of the AI euphoria.

Some AI industry analysts predict OpenAI will collapse completely, as there is room in the market for some models to thrive.

"In the end, it's not the winner takes all," CFRA analyst Angelo Zino said.

"All of these companies are going to take a piece of the pie, and the pie keeps getting bigger," he said of the AI industry frontrunners.

Another factor to consider is that although OpenAI has made dizzying financial commitments, the terms of the deal are likely to be flexible, and Microsoft is a major backer of the startup.