Big AI needs to overcome the high scaling costs of generative AI



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Summary

Tech companies are investing billions in developing and deploying generative AI. That money needs to be recouped. Recent reports and analysis show that it’s not easy.

According to an anonymous source from the Wall Street Journal, Microsoft lost more than $20 per user per month on generative AI code Github Copilot in the first few months of the year. Some users reportedly cost as much as $80 per month. Microsoft charges $10 per user per month.

It loses money because the AI model that generates the code is expensive to run. Github Copilot is popular with developers and currently has about 1.5 million users who constantly trigger the model to write more code.

Companies like Microsoft, Adobe, Google, and Zoom are already responding to higher-than-usual operating costs by offering AI-based upgrades to their software at higher prices. Adobe is introducing usage limits and pay-as-you-go pricing. Zoom is cutting costs with simpler in-house AI.

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“We are trying to provide great value but also protect ourselves on the cost side,” Adobe CEO Shantanu Narayen said. Amazon Web Services CEO Adam Selipsky says customers are “unhappy” with the high cost of running AI models.

ChatGPT app revenue growth reportedly declining

Another issue is the scarcity and cost of chips. OpenAI partners with Microsoft and uses a supercomputer with 10,000 Nvidia GPUs for its services. Each query costs about 4 cents, according to Bernstein analyst Stacy Rasgon.

If those queries were one-tenth the volume of Google searches, Rasgon says, the initial investment in GPUs would be about $48.1 billion, with annual maintenance costs of about $16 billion.

With that in mind, there is an upside for OpenAI when analytics platform Appfigures estimates that ChatGPT app revenue growth fell from as much as 39 percent in August to 20 percent in September. September revenue is estimated at $4.58 million.

Image: Appfigures

According to Appfigures, the ChatGPT app has been downloaded about 52 million times so far, with 15.6 million new installations in September alone. 9 million came via Android, 6.6 million via iOS.

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