OpenAI's Fragile Empire on the Brink

By 2025, Google Proves to Be the Unmatched Rival OpenAI Couldn't Afford

Once at the forefront after ChatGPT's launch, OpenAI's dominance has significantly diminished.

The launch of ChatGPT in 2022 caught Google off guard, threatening to disrupt its search business. This caused such alarm within Google that top executives declared a "code red" and even brought back founders Sergey Brin and Larry Page from retirement to strategize a counter. To quickly respond to OpenAI’s challenge, Google rolled out its own chatbot, Bard, on February 6, 2023. However, the new AI famously faltered, leading to a noticeable drop in Google’s stock when it erroneously responded during a public demonstration concerning NASA's James Webb Space Telescope.

While Google moved to counteract OpenAI's influence, other tech giants like Microsoft and Apple sought partnerships to incorporate its AI technology into their offerings, promising significant impacts on various sectors of the economy.

Following these developments, OpenAI’s once firmly held position began to weaken visibly, particularly as a series of unfavorable events unfolded by 2025. On January 20 of that year, as OpenAI's CEO, Sam Altman, was engrossed with other technology leaders at an inauguration event, the Chinese firm DeepSeek covertly launched its R1 model. In just one week, their new chatbot surpassed ChatGPT as the most downloaded app on the US App Store. This swift success led to a dramatic downfall in stock market value, costing $1 trillion and likely catching OpenAI off guard.

In reaction to these events, OpenAI displayed a renewed sense of urgency. Within a single week, the company endeavored to make a significant splash by releasing both o3-mini and Deep Research, even announcing the latter unusually on a Sunday. Nevertheless, despite this vigorous effort, their flagship release of the year failed to meet expectations.

GPT-5's Disappointing Debut

GPT-5 was highly anticipated as a breakthrough—billed as an upgrade in intelligence, speed, and overall performance over its predecessors. However, once available to users, the feedback was underwhelming, as complaints surfaced about its errors and lack of character. Many felt that the older GPT-4o was, surprisingly, superior. This is not a suitable place for any AI company eager to justify heavy investments, especially one like OpenAI.

Competitors Seizing the Opportunity

Sensing OpenAI’s vulnerability, companies like Anthropic moved swiftly—securing a partnership with Microsoft for its Claude models in Copilot 365. Before this shift, Microsoft had solely relied on OpenAI models. Reports indicated that Microsoft switched to Anthropic's Sonnet 4.0 model as it demonstrated superior performance in nuanced but crucial ways compared to OpenAI’s offerings.

Moreover, OpenAI's internal restructuring seemed insignificant soon after Google released Gemini 3 Pro on November 18. Instantly, Google's new AI surged past competitors, including GPT-5, earning the top position in LMArena's rankings—a platform where users evaluate and vote on the best AI outputs. At the time this piece was written, GPT-5 was only ranked sixth, trailing behind models from Anthropic and xAI.

Financial Struggles and Strategic Risks

A report from December suggests that in response to the release of Gemini 3 Pro, Altman issued a company-wide memo instigating a 'code red' to revitalize ChatGPT. He indicated to the team that some roles would be temporarily reassigned and certain product launches would be postponed to regain competitive ground.

While ChatGPT’s user base stands at a striking 800 million monthly users, Google is swiftly narrowing this gap. By October, their Gemini application had reached 650 million users, partly exploding in numbers due to its Nano Banana Pro image creator.

The key downside for OpenAI is its dependency on substantial funding, unlike Google, which can channel profits from its vast suite of services to support AI development. With persistent fundraising demands, OpenAI faces daunting financial forecasts—needing to expand its revenue to $200 billion annually to hit profitability by 2030. According to Altman, this year's revenue projections are well north of $20 billion.

To boost revenue prospects, OpenAI has embraced a bold, albeit perilous, approach, signing over $1.4 trillion in infrastructure deals to outpace competitors—a strategy fraught with risks of a financial bubble. In early 2025, investments in data centers almost entirely drove the US GDP growth, raising fears reminiscent of past economic crises that could lead to higher costs for electronics in the short run.

Rippling Effects on the Tech Industry

Since late October, demand surges for high-grade computer components, such as memory and storage, have driven consumer PC prices through the roof. The rising demand from customers like OpenAI and Google has doubled or tripled RAM kit costs, and SSD prices saw increases up to 60 percent by November. The costs for LPDDR5X memory, used widely in smartphones and NVIDIA servers, are also expected to continue rising.

Zhao Haijun, co-CEO of SMIC, highlighted the mounting pressure on industries reliant on memory—from car and smartphone manufacturers to consumer electronics enduring supply constraints and cost surges in the coming months.

Former chief economist for the International Monetary Fund, Gita Gopinath, speculated that a burst of the AI bubble could obliterate $20 trillion in wealth from US households. During the Great Recession, considered the most substantial financial downturn since the Great Depression, household net worth in America dipped by $11.5 trillion and took extensive time to rebound to pre-crisis levels.

Although ChatGPT was the catalyst for what is now a highly saturated AI market, even OpenAI's collapse won't surely lead to a bursting of the AI bubble. However, with diminished novelty and technological edge, Altman needs to justify why OpenAI is still a worthy candidate for monumental investment ventures.