KATHMANDU: Three years after ChatGPT made OpenAI a household name and a leader in artificial intelligence, investors and analysts are questioning whether the startup can maintain its dominance amid rising competition and mounting costs.
Investor Michael Burry, famed for “The Big Short,” recently compared OpenAI to Netscape, the web browser pioneer of the 1990s that was overtaken by Microsoft’s Internet Explorer. “OpenAI is the next Netscape, doomed and hemorrhaging cash,” Burry said in a post on X (formerly Twitter).
Researcher Gary Marcus, known for his skepticism of AI hype, echoed similar concerns, noting that OpenAI has lost the lead it gained with ChatGPT’s launch in November 2022. “The startup is burning billions of dollars a month,” Marcus said.
Despite these warnings, ChatGPT remains one of the fastest-growing consumer tech launches in history, boasting over 800 million weekly users, both paid and unpaid. OpenAI’s valuation has soared to $500 billion in funding rounds, higher than any other private company.
However, the startup is projected to end this year with several billion dollars in losses and does not expect profitability before 2029—a long horizon in the rapidly evolving AI industry. OpenAI has committed to investing over $1.4 trillion in computer chips and data center infrastructure to support its AI ambitions.
The company faces stiff competition from tech giants like Google, whose Gemini AI reportedly has 650 million monthly users, and other deep-pocketed rivals including Amazon, Meta, and Microsoft. These competitors can support AI investments with substantial existing revenue streams, raising questions about OpenAI’s long-term financial sustainability.
OpenAI CEO Sam Altman has acknowledged the challenging environment, warning internally of a “turbulent” and “unfavorable” economic climate. When Google released its latest AI model, Altman issued a “red alert” to ensure teams delivered top performance on ChatGPT.
The startup continues to innovate, unveiling a new ChatGPT model last week and announcing a partnership with Disney, which will invest in OpenAI and license characters for the AI bot and Sora video-generating tool.
Industry observers are divided on whether OpenAI will remain private or move quickly to an IPO to capitalize on AI enthusiasm. Foundation Capital partner Ashu Garg sees potential in OpenAI’s massive investments, but acknowledges that returns are uncertain.
“Competition is coming, and its capital structure is obviously inappropriate,” said Espen Robak of Pluris Valuation Advisors, though he noted that OpenAI’s valuation continues to rise.
Many analysts stress that AI is not a winner-takes-all market. CFRA analyst Angelo Zino said there is room for multiple AI models to succeed as the industry expands. With flexible deal structures and Microsoft’s support, OpenAI may continue to grow despite the challenges.
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