Silicon Valley has bet big on generative AI but it’s not totally clear whether that bet will pay off. A new report from the Wall Street Journal claims that, despite the endless hype around large language models and the automated platforms they power, tech companies are struggling to turn a profit when it comes to AI.
Exhibit A: Microsoft. The tech giant, which has invested billions in generative AI via its partner OpenAI, has been losing money on one of its major AI platforms. Github Copilot, which launched in 2021, was designed to automate some parts of a coder’s workflow and, while immensely popular with its user base, has been a huge “money loser,” the Journal reports. The problem is that users pay $10 a month subscription fee for Copilot but, according to a source interviewed by the Journal, Microsoft lost an average of $20 per user during the first few months of this year. Some users cost the company an average loss of over $80 per month, the source told the paper.
Other platforms are going through similar financial difficulties. OpenAI’s ChatGPT, for instance, has seen an ever declining user base while its operating costs remain incredibly high. A report from the Washington Post in June claimed that chatbots like ChatGPT lose money pretty much every time a customer uses them.
The reasons why the AI business is struggling are diverse but one is quite well known: these platforms are notoriously expensive to operate. Content generators like ChatGPT and DALL-E burn through an enormous amount of computing power and companies are struggling to figure out how to reduce that footprint. At the same time, the infrastructure to run AI systems—like powerful, high-priced AI computer chips—can be quite expensive. The cloud capacity necessary to train algorithms and run AI systems, meanwhile, is also expanding at a frightening rate. All of this energy consumption also means that AI is about as environmentally unfriendly as you can get.
To get around the fact that they’re hemorrhaging money, many tech platforms are experimenting with different strategies to cut down on costs and computing power while still delivering the kinds of services they’ve promised to customers.
Still, it’s hard not to see this whole thing as a bit of a stumble for the tech industry. Not only is AI a solution in search of a problem, but it’s also swiftly becoming something of a problem in search of a solution. Companies need to figure out how these tools make both economic and strategic sense—something that probably should have been ironed out before they were launched.