🪦 OpenAI is going bankrupt ... Our take

AI-HOI AInauten,

Is OpenAI going bankrupt, or is it soon outperforming Google with the new SearchGPT project? Questions upon questions, but we have answers.

Today it's a bit more of a bird's eye view, and in the next edition will have some more exciting practical tips and examples planned.

What you can expect:

• 💥 Is OpenAI going bankrupt soon? The problem of the industry

• 💬 SearchGPT - OpenAI wants to give Google a run for its money

• 📰 AI news quickie: The HAI highlights

Here we go!

💥 Is OpenAI going bankrupt soon? The problem of the industry

Imagine you wake up one morning and your favorite AI assistant is gone. Why? Because OpenAI went bankrupt!

This is a possibility, at least if you believe the latest report from The Information. And this source is usually very well-informed...

Almost a year ago, we took this idea apart and disproved it - but in the meantime, the cards have been reshuffled.

There are some challenges:

• High initial costs: The development of models such as GPT-4 (and of course its successors) devour a lot of money in research, development and training.

• Ongoing operating costs: The more users, the higher the costs ...and OpenAI has just released GPT-4o mini for the whole world to use - for free!

• Talent war: Since OpenAI's workforce has already grown to 1500 employees, the personnel costs amount to a whopping 1.5 billion dollars per year (= yes, on average one million per employee).

• Open source models: There are a huge number of open models that can be used commercially - and in many areas these are comparable to models from OpenAI and peers...

High costs plague the industry

It is reported that OpenAI will face losses of up to 5 billion dollars in 2024. The high cost of technology development is more than 3 billion dollars for training new models alone, and almost 4 billion dollars for using Microsoft's servers to process queries.

Even the millions of users and billions in revenue are not enough to cover these massive operating costs ... OpenAI competitor Anthropic is also struggling with a similar situation and could burn over 2.7 billion dollars this year.

The massive investments in infrastructure have led to NVIDIA becoming one of the most valuable (and important!) companies in the world, practically overnight. Whether this meteoric rise will continue remains to be seen.

Revenue is sluggish ...

According to estimates, OpenAI generates annual sales of around 2 billion dollars, while investors have valued the start-up at 80 billion dollars. Thanks to strong interest from business customers, turnover is expected to double by 2025 (while the cost of intelligence continues to fall dramatically).

That's still nowhere near enough to cover the costs - but with supporters like Microsoft and Sequoia, it's unlikely that we'll have to do without ChatGPT any time soon.

And despite predicted losses, OpenAI continues to expand. A few days ago, it announced Google challenger SearchGPT (see below).

But Sam is apparently also thinking about reorganizing the messed-up company structure and switching to "for-profit" - which would not rule out an eventual IPO.

Our take: The hype is real, but so are the achievements

To be clear: OpenAI will NOT go bankrupt anytime soon. And the current hype around AI is real, but the financial challenges are also undeniable.

Critics are therefore loudly joining in the chorus that AI is not a profitable business idea. That the bubble will soon burst and bring us a Dotcom Crash 2.0. And it's not just OpenAI, the entire industry is feeling the strain - competition is fierce.

No wonder, when you can switch to a different, cheaper, faster, more open model with just changing "one line of code", so to speak! Every provider must therefore ask themselves these questions:

• What is my competitive advantage?

• Do I have a unique technology?

• How can we become profitable?

• Do we have a killer app?

• What can the customer use reliably (and what is just a demo)?

Despite all these prophecies of doom, the models are getting better from week to week and are trumping human intelligence in one discipline after another. Surely it will be possible to find a viable business model?

💬 SearchGPT - OpenAI wants to give Google a run for its money

OpenAI has introduced SearchGPT. This new function is designed to provide timely answers from web sources.

The biggest advantage of such a solution: Nobody wants links and ads, but answers to our questions - and that's exactly what SearchGPT provides!

You can join the waitlist here.

SearchGPT combines the power of ChatGPT with real-time information and sources from the web, and presents them in a visually appealing way. Instead of a simple list of links, the results are organized and made understandable.

In one example from OpenAI, the search engine summarizes information about music festivals and then presents short descriptions of the events with references.

In another example, it explains when tomatoes should be planted and describes different tomato varieties. After the results, you can ask follow-up questions or open other relevant links in the sidebar.

OpenAI works with third-party providers and uses content feeds to build its search results. It will later be integrated directly into ChatGPT and not as a standalone app, as it is now.

The prototype, which has been declared temporary, will initially only be made available to a small group of users (10,000, according to OpenAI) and publishers.

This is where the deals with publishers (e.g. TIME, NewsCorp, The Atlantic, Axel Springer, ...) come into play in order to prominently highlight their content. In the future, the content will also be further enriched with local information and apparently also product offers.

OpenAI has been crawling the web for some time now and has also been working on the topic of search for a while. For the answers, the company's own OpenAI index is used in combination with the Bing index. No wonder, Anthropic is crawling with full speed ahead ...

Of course, Google's dominance is still overwhelming, but the signal on the stock market was clear: Google lost over $40 billion in value immediately after the announcement!

The most important SearchGPT features at a glance:

• Fast search with direct, up-to-date answers

• Real-time data from the web with clear sources

• Intuitive interaction enables conversation-like follow-up questions

• Visual results with images and videos for better understanding

P.S.: In the meantime, we recommend that you also try out https://www.perplexity.ai. The tool is pretty cool, and we're using it more and more.

📰 AI-News-Quickie: The HAI-lights

It's time for another update on the most important news - here we go!

New language models

• Have you tested the new Llama 3.1 yet? These model are the new gold standard for open models. Try it on Groq (superfast!), Together or Huggingface.co, or with a VPN via Meta.ai.

• The Llama 3 405b model is very powerful - could the EU authorities classify it as a "systemic risk" under the AI Act ...?

• But also Mistral Large 2 entered the ring with comparable benchmarks. The model outperforms Claude 3.5 Sonnet and Claude 3 Opus in code generation and takes second place in math benchmarks.

• To counter, OpenAI offers free fine-tuning of GPT-4o mini!

Audio, Image & Video

• The Chinese Sora, KLING AI, is now free for everyone to use - just register and get started. There are many great examples on X, but our first attempts so far have been rather meh…

• Udio.com has introduced the new, improved version 1.5 - top audio quality, professional features such as stem downloads & key guidance, new workflows, better language support, shareable lyric videos, audio to audio, ...

• With UltraPixel you can create high-resolution images with up to 2560×5120 pixels.

• Stable Video 4D can generate eight perspectives from one video, which is interesting for film production, gaming and AR/VR.

• This is a pretty cool AI-generated trailer - created with Midjourney, LumaLabs and Elevenlabs.

Research

• Google releases Project Oscar, an open-source platform for creating AI agents to manage software projects, especially for monitoring problems and errors.

• In England, 8% more cancer cases are already being diagnosed thanks to "C the signs" AI.

• When Claude talks to himself ... it gets exciting.

That's it for today. We hope you liked it - see you next time!

Reto & Fabian from the AInauts

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