Sam Altman Says OpenAI Is Slashing Its Hiring Pace as Financial Crunch Tightens

In a memo sent to employees last month, OpenAI’s CEO issued a “code red” urging employees to redouble their efforts to improve the company’s flagship product, ChatGPT, as financial pressures emerge and competitors gain ground.

The company continues to frantically chase some much-needed revenue. Although Altman called ads “a last resort for us as a business model” in 2024, the company announced earlier this month that ChatGPT would soon start spamming users.

The cash burn rate is tremendous. The company plans to spend more than $1 trillion in the coming years on data center infrastructure, although revenues lag far behind. Experts have warned that the company may run out of cash in 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 chose to pump the brakes. During a live-streamed town hall event on Monday, Altman said OpenAI is looking to “significantly slow down hiring” as the company continues to lose billions of dollars each quarter, as the company continues to lose billions of dollars each quarter. Business insider Reports.

“What I think we shouldn’t do, and what I hope other companies don’t do as well, is hire super aggressively, and then suddenly realize that AI can do a lot of things, and you need fewer people, and you have to have a very uncomfortable kind of conversation,” Altman told the audience. “So I think the right approach for us is to hire slower but continue to hire.”

This news comes amid widespread concerns about rising unemployment rates in the United States. While consumer spending has increased, the labor market has been hit hard as companies dramatically restrict hiring, often due to massive investments in artificial intelligence.

Altman’s admission also suggests that several years of intense hiring in the AI ​​sector could come to a grinding halt as the industry continues to face pressure from investors concerned about declining return prospects.

This news has become especially notable after years of AI companies adopting an unprecedented hiring spree, desperately trying to snatch talent from their competitors by offering them astronomical pay packages.

It remains to be seen whether Altman’s announcement indicates that those days are over forever. Big Tech’s overspending is expected to continue in the coming years. Many of them have already made huge commitments to scale operations by expanding massive data centers.

At the same time, selling those future prospects to investors may also become more difficult. For example, OpenAI was already experiencing stalled subscriber growth, before harassing its users with ads or blocking features behind expensive monthly subscriptions. (The company is currently considering how much to charge for ads.)

As former Fidelity CEO George Noble attacked in a scathing article about X, the AI ​​industry may have already reached a point of diminishing returns. Companies still have a lot to prove — chatbots, for example, still suffer from rampant hallucinations — as goalposts continue to move.

“The low-hanging fruit is gone,” he wrote. “Every incremental improvement now requires significantly more compute, more data centers, and more power.”

Meanwhile, Google — one of OpenAI’s biggest competitors — can rely on an already established company with existing revenue streams to support its AI spending.

In short, Altman’s significant hiring slowdown may be a sign of a tough time ahead. And if the critics are to be believed, things may already be starting to move.

More about OpenAI: The asset manager warns that OpenAI is likely headed toward financial disaster