This Fatal Flaw Could Kill The AI Industry
The maths isn’t adding up.
AI will revolutionise the world and, in doing so, displace vast swathes of the economy and create some of the most profitable and valuable companies ever. Or at least, that’s the line we have been sold. Over the past few years, this narrative has only grown stronger, and investors, particularly institutional investors, venture capitalists (VC) and tech giants, have poured hundreds of billions of dollars into the AI space to secure their slice of this revolution. However, upon reflection, many of them are expressing deep buyer’s remorse. Why? Well, when you look at the numbers, AI can simply never become properly profitable.
The first hint of anything being financially wrong came last year from the Analytics India Magazine. They noticed that at the time, OpenAI was spending $700,000 per day, or $255 million per year, just on maintaining the underlying infrastructure of ChatGPT. At the time, OpenAI was only predicted to have an annual revenue of $200 million. In other words, despite the vast success of ChatGPT and the switch to a for-profit model, it seems OpenAI would continue to run at a loss of hundreds of millions of dollars per year, as they couldn’t even cover their basic costs. At the time, OpenAI was predicted to have a 2024 revenue of $1 billion, but as operational costs were set to grow…
