WEB DESK: Three years after ChatGPT catapulted OpenAI into global prominence as the leader in artificial intelligence, the landscape has shifted. Competitors have narrowed the gap, prompting some investors to question whether OpenAI can sustain its dominance.
Notably, investor Michael Burry, famously portrayed in “The Big Short,” recently drew parallels between OpenAI and Netscape, the pioneering web browser of the 1990s that ultimately succumbed to Microsoft’s Internet Explorer. Burry remarked on X (formerly Twitter), “OpenAI resembles Netscape—doomed and hemorrhaging cash.”
Researcher Gary Marcus, known for his skepticism about AI hype, believes OpenAI has lost its initial edge since the launch of ChatGPT in late 2022. “They’re burning billions each month,” Marcus stated, expressing concern about the company’s financial sustainability. “The writing has been on the wall for some time, and it’s disappointing to see it unravel.”
Despite these criticisms, ChatGPT shattered records with its rapid consumer adoption, amassing over 800 million weekly users, both free and paid. The company’s valuation skyrocketed to around $500 billion in private funding rounds—making it the most valuable private tech firm globally. Yet, OpenAI is expected to end the year with multibillion-dollar losses and forecasts profitability no sooner than 2029—an eternity in the fast-paced AI race.
To support its ambitions, OpenAI has committed over $1.4 trillion to infrastructure, securing supplies of advanced chips and data center capacity. This aggressive cash burn raises eyebrows, especially when competitors like Google, with its 650 million monthly users of Gemini AI and vast advertising revenue, seem better positioned to bankroll their AI ventures.
Meanwhile, giants like Amazon, Meta, and Microsoft, which has heavily invested in OpenAI, possess deeper financial resources than OpenAI alone can muster.
OpenAI CEO Sam Altman, known for his charisma, recently showed rare frustration when questioned about the company’s multi-trillion-dollar contracts. Shortly after, he warned of potential turbulence in the economic climate and increasing competition, particularly from Google’s new models. When Google’s latest AI received positive reviews, Altman issued an internal “red alert,” urging teams to focus intensely on improving ChatGPT.
Recently, OpenAI released an upgraded ChatGPT model, coinciding with Disney’s announcement to invest and license characters for integration into OpenAI’s products, including its video-generating tool, Sora.The challenge for OpenAI is convincing investors that its hefty investments will generate returns. Foundation Capital partner Ashu Garg noted that while OpenAI continues to raise funds at lofty valuations, the actual profitability of these investments remains uncertain.
Despite the doubts, OpenAI retains strong backing from some of the world’s wealthiest investors. Yet, valuation experts like Espen Robak of Pluris Valuation Advisors expect the company’s worth to decline due to mounting competition and structural concerns. Ironically, Robak observes that valuations seem to only be climbing.
Industry analysts are divided on whether OpenAI will delay going public or accelerate its IPO to capitalize on AI market euphoria. Most agree that the AI space is far from a winner-takes-all scenario. “There’s room for multiple players,” said CFRA analyst Angelo Zino. “The market continues to grow, and each company will carve out its share.”
In summary, while OpenAI’s financials and strategic position are under scrutiny, the consensus remains that the company is unlikely to vanish overnight. The AI industry is still expanding, and with major corporations backing these efforts, several companies are poised to thrive—regardless of who ultimately leads the pack.
