OpenAI Doubles Compute Margins To Nearly 70% Amid AI Race: Report

OpenAI has reportedly seen a significant improvement in its profit margins, marking a crucial development in the AI industry.

OpenAI Boosts Compute Margins to 68%

OpenAI has improved its “compute margin,” which reflects the portion of revenue remaining after covering the costs of operating models for paying users of its corporate and consumer products. By October, the company's compute margins rose to 68%, up from 52% at the end of 2024 and more than double the level seen in January 2024, reported The Information on Sunday.

The report also noted that OpenAI’s compute margins for paid accounts are better than those of Anthropic, a competitor in the AI space. However, Anthropic is more efficient in overall server spending. OpenAI, the creator of ChatGPT, has not yet turned a profit, raising investor concerns amid potential industry overvaluation. Last valued at $500 billion in October, the company is working to boost revenue to support its high computing expenses and expansive infrastructure plans.

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Sam Altman Eyes $100 Billion Funding Amid Costs

OpenAI’s improved profit margins come at a critical time for the company. Earlier this month, Sam Altman, the CEO of OpenAI, expressed concerns about Google’s (NASDAQ:GOOG) (NASDAQ:GOOGL) dominance in the AI space and entered the “Code Red” zone. The company’s ability to enhance its margins could be seen as a strategic move to strengthen its position in the industry.

Moreover, OpenAI is reportedly in discussions with investors about raising as much as $100 billion at a valuation of roughly $750 billion. This potential fundraise, coupled with the improved profit margins, could significantly impact OpenAI’s financial standing and its ability to compete with tech giants like Google.

However, the increasing costs of competing in AI have also put pressure on OpenAI’s finances. SoftBank (OTC:SFTFB) (OTC:SFTBY) is reportedly racing to assemble $22.5 billion in funding for OpenAI by year-end, leaning on asset sales, potential borrowing, and a sweeping pullback in other investments.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.