OpenAI has been in a much less commanding position since the public release of ChatGPT a few years ago.
In 2022, the sudden popularity of ChatGPT made Google panic. The company was so concerned about the upstart chatbot’s potential to disrupt its search business, executives sounded a “code red” alert within the company and called Sergey Brin and Larry Page out of retirement to help OpenAI respond. This prompted Bard to announce its first commercial chatbot on February 6, 2023. Google’s stock tanked days later when AI gave incorrect answers about a public demo about NASA’s James Webb Space Telescope.
But it wasn’t just Google that wanted a piece of OpenAI, while the search giant sought to compete with it, others — including Microsoft and Apple — struck deals with the company to bring the technology to their products and services, all promising that AI would eventually revolutionize every aspect of the economy.
Since then, OpenAI has seen its lead against Google and much of the AI industry evaporate, leading to a series of setbacks in 2025. On January 20, the same day Altman was busy rubbing shoulders with other tech oligarchs at Donald Trump’s inauguration, China’s DeepSeek quietly released its R1th-chaught-chain model. A week later, the startup’s chatbot surpassed ChatGPT as the most downloaded free app in the US App Store. DeepSeek’s overnight success wiped out $1 trillion worth of stock market value, and almost certainly blindsided OpenAI.
In response, the company revealed the new found immediately. In one week, for example, OpenAI released both o3-mini and Deep Research. It was announced later on Sunday evening. But for all its newfound urgency, OpenAI missed the biggest, most important release of the year.
It’s safe to say that GPT-5 hasn’t met anyone’s expectations, including OpenAI’s own. The company touted the system as smarter, faster and better than all previous models, but after users got their hands on it, they complained of a chatbot that made surprisingly stupid mistakes and didn’t have much personality. For many, GPT-5 felt like a downgrade compared to the older, simpler GPT-4o. It’s a situation that no AI company wants to be in, let alone one as heavily invested as OpenAI.
Anthropic was quick to take advantage of the weakness, signing a deal with Microsoft to bring its cloud models to Copilot 365. Previously, Microsoft relied solely on OpenAI for partner models in Copilot. Before the company announced the merger, reporting from InformationMicrosoft said it made the decision based on the strengths of Anthropic’s Sonnet 4.0 model, calling it “performance[ed] Better in subtle but important ways relative to OpenAI’s offerings.
However, what would go down as a defining moment came just weeks after OpenAI announced the completion of its restructuring. On November 18, Google released the Gemini 3 Pro, and the new model immediately leapfrogged the competition, including the GPT-5. As of the writing of this article, Google’s new model is at the top of LMArena, a site where people compare outputs from different AI systems and vote on the best. GPT-5, by contrast, is currently in sixth place, behind models from Anthropic and Elon Musk’s xAI.
According to a report dated December 2 TheThe Wall Street JournalSam Altman sent out a company-wide memo after the release of Gemini 3 Pro. Echoing the words Google used to describe the situation it found against OpenAI in 2023, he called for a “code raid” effort to improve ChatGPT. Altman reportedly told employees there would be temporary reassignments and the company would delay some products, all in an effort to catch up with Google and Anthropic.
The few numbers these companies are willing to share don’t paint a promising picture for OpenAI. Every month, about 800 million people use ChatGPT. On paper, that’s impressive, but Google is catching up there, too. In October, the company said the Gemini app had 650 million users, up from just 450 million a few months earlier in July, thanks to the popularity of its Nano Banana Pro image generator.
More importantly, OpenAI has an inherent disadvantage against Google. For the search giant, AI may touch everything the company does now, but Gemini is just one product in a broader portfolio that includes many other popular services. Google can fund its AI advances with money it earns elsewhere. OpenAI cannot say the same. The company is raising money to continue operating, and according to the received financial roadmap journalIt needs its revenue to grow to about $200 billion annually to reach profitability by 2030. In November, Altman told X that the company was on track to top $20 billion in annual revenue this year.
In an effort to increase revenue, Altman and company have adopted an incredibly risky strategy. In recent months, OpenAI has signed more than $1.4 trillion in infrastructure deals to outscale the competition it’s already winning. Many of those deals can only be described as circular, and I think the fears about a financial bubble are real. In the first half of 2025, investment in data centers accounted for nearly all of US GDP growth. Even if it’s not a repeat of the housing market crisis of 2008 or the dot-com crash, the AI boom is at least poised to make everyday electronics (and utilities) more expensive for regular people in the short term.
Since late October, demand for server-grade computer components, including memory and storage, has skyrocketed consumer PC parts prices as manufacturers dedicate more production capacity and wafers to high-margin customers such as OpenAI and Google. Since late October, most RAM kits have doubled and tripled in price. In November, the price of some SSDs increased by as much as 60 percent. Next year, the cost of LPDDR5X memory used in both smartphones and NVIDIA servers are also expected to climb.
“Be it car makers, smartphones or consumer electronics, everyone who uses memory is facing pressure from price increases and supply constraints in the coming year,” Zhao Haijun, co-CEO of memory maker SMIC, told analysts. Bloomberg.
Gita Gopinath, former chief economist of the International Monetary Fund, recently estimated that if the AI bubble burst, it would wipe out $20 trillion in wealth held by American households. Considered the worst economic downturn since the Great Depression, the Great Depression reduced the net worth of American households by $11.5 trillion, and it took years for American households to rebuild their wealth to pre-recession levels.
The modern AI bubble may have been started by ChatGPT, but given the crowded field of chatbots and LLMs, this OpenAI bust doesn’t have to go. With innovation and technological prowess no longer on its side, it’s now up to Altman to prove in short order why his company is still worthy of an unprecedented level of investment.
