By Jez Corden

OpenAI CEO Sam Altman has had an unfortunate dose of reality, reckoning with the fact ChatGPT is a uniquely powerful money destruction machine.

(Image credit: Sam Altman photo (Getty Images | Bloomberg), edit Windows Central)

OpenAI's Sam Altman seems to have received a hard dose of reality from somewhere, as ChatGPT's wanton money-digestion is coming to an end.

Yesterday, OpenAI formally announced that it will begin bringing ads to ChatGPT. The ads will appear at the bottom of chats for free and "Go" subscription users. Users on higher tiers won't see them (for now at least).

OpenAI claims that it won't sell your data to third parties, and that there will be ways to opt-out of using conversations for ad personalization. But, it's a uniquely interesting moment for ChatGPT and OpenAI for a variety of reasons.

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OpenAI has been under immense pressure from Google Gemini, whose latest models have seen it leapfrog ChatGPT in some benchmarks. Investors have increasingly become aware of Google's powerful position with regards to AI, controlling the entire stack from server tech and cloud, to endpoints via Android, Chrome, and Google.com itself.

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ChatGPT finds itself on something of an island, reliant almost entirely on apps to find users and third-parties to find compute, chiefly Microsoft and Azure. It has hundreds of millions of monthly active users and various major enterprise contracts, but its balance sheet is nowhere near approaching any semblance of profitability. Yet, it's on the hook for over a trillion dollars of compute commitments in the next decade, and that money certainly has to come from somewhere.

Investors have clearly gotten tired of waiting for AI to show pathways to profitability. Microsoft's own share price has seen a downward trend over the last couple of quarters, as capital expenditure seems to be outpacing the raw economics of the now. Microsoft's products are powered by ChatGPT and other OpenAI models, and it has found success with products like Github Copilot and Microsoft 365 Copilot integrations. Fortune 500 companies tend to prefer Microsoft for its expertise in regulatory compliance, as well as its industry-leading position in corporate security. Nation states use Microsoft Copilot (for better or worse), owing to perceptions around its capacity to remain insulated and secure from the wider web.

Google, Microsoft, Meta, and other major tech companies can self-cash flow its AI development and infrastructure build out, but ChatGPT relies entirely on funding rounds from venture capital firms, Wall Street, and big companies like Microsoft. ChatGPT's balance sheet reads like a sci-fi horror novel, and the mood seems to be shifting away from hype and towards hard realities.