(How) Will Chatgpt Make Money?

It's clear as day that the glory days of tech investing are over, at least for now. The Nasdaq index, a very good barometer for tech company valuations, contracted by about a third in 2022 compared to the previous year, prompting some to reminisce about the dot-com bubble years.

And the decline in stock markets had adverse effects on private investment. Fund managers trained for decades to risk billions of dollars on (seemingly) revolutionary ideas are finding it harder and harder to reach their pockets. The number of unicorns – the much-loved companies with a value of at least one billion dollars – fell globally by more than 85% in 2022.

It is equally clear that, in this oppressive landscape, we are witnessing the configuration of a new "miracle", both in terms of popularity and in terms of evaluation. Obviously, it is about OpenAI, the company that develops ChatGPT, a technical name that is difficult to remember, which, in just a few months, has become almost as popular as Facebook or Google.

The rapid success of the technology that knows how to answer philosophical questions, compose songs or draw portraits better than humans was a surprise to the programmers at OpenAI themselves, who launched ChatGPT in November 2022 in the form of a "research preview", according to MIT Technology Review.

In the beginning, in 2015, OpenAI was actually a non-profit research project, funded among others by the billionaire Elon Musk, the founder of Tesla. Meanwhile, Musk has withdrawn from OpenAI and now looks with envy at the huge success of this technology and invites (he, the defender of absolute freedom) the authorities to regulate artificial intelligence, because it is dangerously powerful. In March 2019, the project turned into a commercial company, and Microsoft became its main backer with an investment of one billion dollars.

NO IDEA. A month before Microsoft's investment materialized (June 2019), Samuel Altman, co-founder and chief executive officer (CEO) of OpenAI, admitted in a meeting with several investors that he had "no idea" how he could do profitable company.

And probably back then looks didn't even matter that much. What's more, he jokingly added, perhaps general AI itself will help investors find, on demand, a way to make the company profitable.

Things have changed a lot since then. First, without substantial revenue (let alone profit), OpenAI cannot survive in competition with Alphabet or Meta, which are pumping billions of dollars into artificial intelligence. In addition to the tech giants, a lot of start-ups like OpenAI have emerged, which are nimbly exploring the wonderful realm of artificial intelligence.

According to the American newspaper The Wall Street Journal, the company was valued in January 2023 at $29 billion, compared to $20 billion a month earlier and $14 billion in 2021. The valuation was made on the occasion of a new funding rounds in which Microsoft invests another $10 billion in OpenAI.

The company co-founded by Bill Gates is to receive 75% of the profits until it fully covers its investment, after which it will retain a 49% stake. It is easy to infer that Microsoft wants to strengthen its position in the search engine market, which is dominated by Google to the extent of 90%.

2024, the billion. Sources consulted by Reuters showed that OpenAI also courted its investors with some early financial projections. If so far the company's revenues were in the order of tens of millions of dollars, the projection for 2023 is 200 million dollars (turnover) and a billion dollars in 2024. It remains to be seen how these targets will be reached, given that the answers given by ChatGPT are far from perfect, and some of the errors it makes are downright funny.

OpenAI now charges developers who want to use the technology (to create public-facing applications) cents to generate tens of thousands of words of text or images.

However, the materialization of financial expectations will continue to face many obstacles. The first concerns the very imperfection of ChatGPT - a technology "incredibly limited, but good enough in some aspects to create a false impression of greatness", CEO Samuel Altman himself admitted in a December 2022 Twitter post. "Now it's a mistake to rely on it for anything important."

It's also possible that Musk's venomous suggestions about eventual regulation of artificial intelligence will be taken seriously by the authorities one day.

And to be completely honest, not all investors were "enchanted" with ChatGPT's features - some thought it was just a demo not worth paying attention to for now. Others were intrigued by the return limitations the company imposed in 2019: investors can get a maximum of one hundred times their money back.