Background on OpenAI and ChatGPT’s Rise
Three years after ChatGPT propelled OpenAI to the top like no other startup, the company is now facing stiff competition, sparking criticism and doubts within the tech industry and among investors.
Michael Burry, famous for the film “The Big Bet,” wrote in X early December: “OpenAI is the next Netscape: doomed to fail and losing money.” Burry referred to the web browser portal that controlled nearly 90% of the market at the start of 1996 but only held 1% nine years later.
“It was inevitable,” added Gary Marcus, a researcher known for his skepticism about the structure of the AI ecosystem. “OpenAI lost its leadership and tried to do too much.”
The young San Francisco-based firm will forever be remembered as the genius that unleashed generative AI from its lamp. ChatGPT, their now-famous chatbot, shattered all growth records for a mass consumer product, going from zero in November 2022 to over 800 million weekly users currently.
OpenAI’s valuation soared to $500 billion, a previously unknown figure until SpaceX recently surpassed it.
Financial Concerns and Competition
However, OpenAI will close the year with losses of several billion dollars and without expectations of profitability before 2029. The company committed to paying over $1.4 trillion to chip manufacturers and data center builders to expand its computational capacity, crucial for AI development.
Financial concerns have grown, especially since Google claims to have 650 million users of its AI interface, Gemini.
OpenAI’s Response and Recent Developments
Sam Altman, OpenAI’s CEO and a skilled salesman, showed signs of irritation for the first time in early November when addressing questions about over-billion-dollar contracts. He later warned internally that OpenAI risks facing a “turbulent context” and an “unfavorable economic environment,” mentioning Google’s advances.
He issued a “code red” urging teams to focus on ChatGPT. Last Thursday, OpenAI unveiled a new AI model, GPT-5.2, ranking among the top performers in multiple measurements, and announced a significant partnership with Disney.
Expert Opinions and Future Outlook
Ashu Garg, a Foundation Capital partner, stated: “OpenAI is investing heavily in model development, but it’s unclear how this translates to economic terms.”
Espen Robak, a Pluris Valuation Advisors expert in non-listed asset valuation, observed: “I’ve been expecting OpenAI’s valuation to drop because its competition is catching up, but it keeps rising. Its capital structure isn’t well-suited for this, yet it persists.”
Some criticize OpenAI for over-diversification, from infrastructure to the video social network Sora and connected device design. However, only a few analysts predict OpenAI’s implosion.
Angelo Zino from CFRA research firm stated: “There won’t be a single winner in the AI race, but multiple high-quality model providers will be needed,” including OpenAI, which he believes can succeed without remaining number one.
Flexible conditions in many agreements with computing, processor, or cloud service providers also offer some comfort.
“Having Microsoft (27% of the capital) as an investor is invaluable, especially since the partnership with Windows creator ensures a steady and substantial income,” Zino insisted. “All these companies will have a piece of the pie, and the pie will grow much larger.”
