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In a memo sent to employees last month, the OpenAI CEO issued a “code red,” urging employees to improve the company’s flagship product ChatGPT as financial pressures mounted and competitors gained ground.
The company is desperately trying to generate much-needed revenue. Advertisements by AltmanLast resort for us as a business modelIn 2024, the company announced ChatGPT will soon start spamming users with them as of the beginning of this month.
Its cash burn rate is very high. Despite lagging significantly in revenue, the company plans to spend more than $1 trillion on data center infrastructure in the coming years. Experts have warned that the company could run out of cash within the next 18 months. To its most skeptical critics, it is an Enron-like financial disaster waiting to happen.
So perhaps it’s not surprising that the company is opting to pump the brakes. During a livestream town hall event on Monday, Altman said OpenAI wants to “dramatically slow down” the hiring because the company is losing billions of dollars every quarter. business insider reports.
“I think what we shouldn’t do, and I hope other companies don’t do the same, is to hire overly aggressively, then suddenly realize that AI can do a lot of the work, and you need less people, and have to have some kinds of very uncomfortable conversations,” Altman told attendees. “So I think the right approach would be for us to slowly but surely continue to hire.”
This news comes amid widespread concerns over rising unemployment in America. While consumer spending has increased, the labor market I have been dealt a severe blow Hiring by businesses is being largely curbed, often citing heavy investments in AI.
Altman’s admission also suggests that years of aggressive hiring in the AI sector may be on hold as the industry faces pressure from investors worried about diminishing return prospects.
This news is especially notable when AI companies have been making unprecedented hires for years and are desperately trying to poach talent from their competitors by offering them exorbitant salary packages.
Whether Altman’s announcement signals that the good days are over remains to be seen. The exorbitant spending of big technology companies is set to continue in the coming years. Many have already made massive commitments to scale up operations by expanding huge data centers.
Plus, it may be more difficult to sell those future prospects to investors. For example, OpenAI is already struggling with stalling subscriber growth – and that’s before annoying its users with ads or paying for existing features behind expensive monthly subscriptions. (The company is currently I am thinking about it How much to charge for ads.)
As former Fidelity manager George Noble bitterly criticized on X, the AI industry may have already reached the point of diminishing returns. Companies still have a lot to prove – for example, chatbots still suffer from mass hallucinations – as goalposts continue to be transferred.
“The low-hanging fruit is gone,” he wrote. “Each incremental improvement now requires exponentially more compute, more data centers, more power.”
Meanwhile, Google – one of OpenAI’s biggest competitors – can rely on an already established business with existing revenue streams to increase its AI spending.
In short, Altman’s significant hiring slowdown could be a sign of tough times to come. And if critics are to be believed, the wheels may already be starting to come off.
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