OpenAI's Dominance Challenged: Can It Withstand Fierce Competition in AI?

OpenAI's ChatGPT took the world by storm and pushed the company into tech giant territory in just three years. But now that early lead is under serious threat as competition heats up, sparking criticism from investors and industry watchers who question whether the AI pioneer can maintain its edge.

Michael Burry, the investor made famous by "The Big Short" movie, posted on X in early December: "OpenAI is the next Netscape - destined to fail and burning through money." His comparison stings because Netscape once controlled nearly 90% of the web browser market in 1996, only to collapse to less than 1% within nine years.

Gary Marcus, a researcher known for questioning AI's current structure, was equally blunt: "This was inevitable. OpenAI lost its leadership and overreached badly."

The numbers tell a remarkable story. ChatGPT went from zero users in November 2022 to over 800 million weekly users today - growth that's never been seen before. OpenAI's valuation hit $500 billion, keeping it ahead of most competitors until SpaceX recently overtook it.

But here's the problem: OpenAI expects to end this year with billions in losses and doesn't anticipate turning a profit until 2029. The company has committed over $1.4 trillion to chip manufacturers and data center builders to massively expand its computing power - money it needs to stay competitive in AI development.

The financial picture gets more concerning when you consider Google's Gemini AI now claims 650 million monthly users. For the first time, OpenAI CEO Sam Altman showed visible frustration in early November when asked about these massive contracts worth over a trillion dollars.

Days later, Altman sent an internal message warning employees about a "turbulent environment" and "unfavorable economic climate," specifically mentioning Google's competitive progress. He issued an urgent call for teams to focus their efforts on ChatGPT.

OpenAI tried to regain momentum this week by unveiling its new "GPT 5.2" model, which ranks among the best performers on several benchmarks, and announced a major partnership with Disney the same day.

Ashio Garg from Foundation Capital investment firm sees the core issue: "OpenAI is investing huge amounts in developing its models, but it's unclear how this will pay off economically." Given the financial losses and major commitments, he questions OpenAI's current valuation and whether it's raising money at prices that make sense for returns.

Espen Robak, who specializes in valuing private companies at Pluris financial consultancy, has been expecting OpenAI's market value to drop due to increased competition and unsuitable capital structure. "But it keeps rising," he admits.

This turbulent period might force OpenAI to delay its public offering, or conversely, speed it up to attract individual investors who remain interested. Critics also point to the company's scattered focus - from infrastructure to its "Sora" social video network to designing internet-connected devices.

Most analysts don't expect OpenAI to collapse entirely. Angelo Zino from CFRA research believes there won't be a single winner in the AI race. "There need to be several providers of high-quality models," he says, and OpenAI can succeed without staying on top.

Many of OpenAI's deals with computing, processor, and cloud service providers apparently include flexible terms, which helps. Having Microsoft as a major shareholder (27% of capital) provides crucial stability, especially since the partnership with the Windows creator guarantees OpenAI recurring revenue streams.

Zino remains optimistic about the broader picture: "All these companies will get their share of the pie, and the pie will grow significantly."