And OpenAI has been crucial to San Francisco becoming ground zero for the nascent AI industry. It\u2019s not just the premier private company in the sector and one of the most highly valued private companies in the world \u2014 it has helped to spawn a slew of other AI companies in the sector that are based in San Francisco or nearby. Chief rival Anthropic was founded by OpenAI alums, for example, as were Thinking Machines Lab and Safe Superintelligence.\u00a0<\/p>\n
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OpenAI\u2019s headquarters in San Francisco, Nov. 3, 2025.<\/p>\n
Aaron Wojack \u00a9 2025 The New York Times Company<\/p>\n
But OpenAI also provided plenty of fodder for its skeptics and critics. Thanks to its stepped-up investments, its losses are swelling, reportedly growing significantly larger than it previously expected. Around the beginning of September, the company projected it would burn through $115 billion in cash<\/a>\u00a0between then and 2029, according to The Information. That was $80 billion more than it had forecast earlier in the year.<\/p>\n Still, despite OpenAI\u2019s investments, its competitors appear to be catching up in both technology and the market. GPT-5 disappointed customers, because it wasn\u2019t as big an advance as was expected and had some of the same flaws as its predecessors.<\/p>\n Likely as a result of the increased competition, OpenAI\u2019s share of the enterprise market has fallen from about half in 2023 to 27%<\/a> this year, according to Menlo Ventures. And more recently, traffic to ChatGPT has dropped, falling about 5% from October to November, according to web-analytics firm Similarweb.<\/p>\n Yet the company is reportedly out raising money, seeking as much as $100 billion at a valuation of about $750 billion<\/a>, according to The Information. That\u2019s after seeing its valuation hit $500 billion as part of a stock sale in October. And it reportedly could be seeking a valuation of as much as $1 trillion in its prospective IPO.<\/p>\n AI threatens to disrupt plenty of industries and change much about how business gets done, said Siegel. So it makes sense for OpenAI to raise as much money as it can to play as big a role as possible in that disruption, he said.\u00a0<\/p>\n OpenAI and CEO Sam Altman, left \u2014 seen speaking with Federal Reserve Board Chairman Jerome Powell in July \u2014 have committed to spending some $1.4 trillion in coming years.<\/p>\n Mark Schiefelbein\/Associated Press<\/p>\n But it\u2019s seeking additional cash at a time when investors are growing increasingly skeptical of the AI business and its data-center build-out, he said. Oracle, which is teaming up with OpenAI on Stargate, has seen its share price fall by more than one-third since November. CoreWeave, another data-center operator that\u2019s partnered with OpenAI, has seen its share price fall even further.\u00a0<\/p>\n The key questions hanging over OpenAI \u2014 and the rest of the sector \u2014 are how long will it take for the company to start generating positive cash flow and what is it going to take for the company to get there, Siegel said.\u00a0<\/p>\n \u201cOpenAI has got some real technical amazingness to it,\u201d he said. \u201cThat works to their advantage. The biggest issue is just how much capital is it going to be until they don\u2019t need other people\u2019s money.\u201d\u00a0<\/p>\n If investors lose faith or lose hope, things could collapse quickly, he said.\u00a0<\/p>\n Gary Marcus, a longtime skeptic of OpenAI and of generative AI technologies, echoed that concern<\/a> in a December blog post. The company has likely spent nearly all of the massive amount of money it had previously raised and probably has less than a year\u2019s worth of cash left, he said.<\/p>\n <\/p>\n
More than 10 years after UCSF docs started consortium of research institutions, Stanford University joins fold<\/p>\n <\/p>\n
The fortunes of The City\u2019s business core were a study in contrasts \u2014 growing vibrancy and investment beside evidence of continuing economic malaise<\/p>\n <\/p>\n
Champagne toasts, balloon drops and skating sessions are among the ways you can bid adieu to 2025<\/p>\n That means it\u2019s highly dependent on investors to keep going. And few individuals or institutions have the amount of capital OpenAI needs, he said.<\/p>\n Marcus, a professor emeritus at New York University and the author of \u201cTaming Silicon Valley: How We Can Ensure That AI Works for Us,\u201d noted in his post that he\u2019d called out OpenAI\u2019s shortcomings nearly two years before.<\/p>\n \u201cThings took longer to unravel than I thought they would, but OpenAI\u2019s unraveling has begun,\u201d he wrote.<\/p>\n OpenAI isn\u2019t destined to fail, Siegel said, but investor skepticism could force the company to rethink its business and commitments.<\/p>\n If it has a tougher time raising money, it might have to scale back on some of its ambitious plans, he said, which could affect both its business trajectory and the potential return for its current investors.<\/p>\n With less ready cash, \u201cthey\u2019ve got to grow more slowly,\u201d Siegel said. \u201cThey\u2019ve got to invest in fewer things.\u201d<\/p>\n That might not be a bad thing, said Ram Bala, an associate professor of AI and analytics at Santa Clara University\u2019s Leavey School of Business.<\/p>\n Startups often are more innovative when they are operating under financial constraints, Bala said. OpenAI was arguably more innovative when it had far less money at its disposal, he said.<\/p>\n By contrast, when money is easy to come by \u2014 as it has been in recent years for OpenAI \u2014 it\u2019s far easier to waste, he said. OpenAI seems to be doing that by spreading itself across so many different areas, Bala said, competing in both the consumer and enterprise markets, working on AI agents, and trying to build so-called artificial general intelligence\u00a0at the same time.<\/p>\n \u201cWhat\u2019s happening with OpenAI is they are [in] too many different product categories and markets at the moment,\u201d Bala said.<\/p>\n \u201cYou run into the issue of jack of all trades and master of none,\u201d he said.<\/p>\n The bigger danger for the company and the industry is that there\u2019s a near-term investment bubble that\u2019s forming, Bala said.<\/p>\n Open CEO Sam Altman meets Larry McManus of Texas Economic Development and Tourism at the data center in Abilene, Texas on Tuesday Sept. 23, 2025.<\/p>\n Matt O\u2019Brien\/Associated Press<\/p>\n Bala said that in the long term, he\u2019s confident there will be plenty of demand for AI-powered services. But in the short term, there\u2019s a danger that investment in the sector will get far ahead of demand, he said. That happened at the turn of the millennium, when telecommunications companies overinvested in fiber-optic lines, he said.<\/p>\n As the company that has drawn far more capital and is making far more investments than any other in the sector, OpenAI is at particular risk if the bubble pops, Bala said.<\/p>\n Unfortunately, because so many companies are now tied to OpenAI, the fallout could be wide, he said.<\/p>\n \u201cI\u2019m more bullish about AI in general in the next one year,\u201d he said. \u201cI\u2019m less bullish about OpenAI.\u201d<\/p>\n To be sure, Bala said he sees plenty of opportunity for the company too. Were it to focus on the consumer market, where it has a big lead, and build on the partnerships it\u2019s already struck with Intuit<\/a> and Instacart<\/a>, it could cement its place as the go-to AI service for everyday users, he said. If consumers are using ChatGPT to handle their financials, shop for groceries or perform a bunch of other tasks, they\u2019re going to be far less likely to switch to a competing service, he said.<\/p>\n OpenAI\u2019s investment in data-center capacity could also pay off with consumers by offering it the ability to deliver answers nearly instantly, Bala said. In many cases, enterprises don\u2019t need to have that kind of immediate response, he said. But a customer who\u2019s out shopping for something and looking for an answer isn\u2019t going to wait for an hour for it, he said.<\/p>\n The investment in data centers to speed the service for consumers is \u201ca bet, more than AGI, that would have genuine financial value,\u201d Bala said.<\/p>\n For his part, Billy Riggs, a professor of management and engineering at the University of San Francisco, didn\u2019t express any of the same worries about OpenAI as Bala, Siegel or Marcus. Instead, he said he\u2019s bullish on the company\u2019s future, both in the short and long term.<\/p>\n Unlike Bala, Riggs said he thinks it\u2019s not OpenAI but competitors such as Meta and Google that are spreading their development among too many products. OpenAI, by contrast, is focused on developing its core AI technology, he said.<\/p>\n In the enterprise sector, OpenAI has established itself and has a stable core of customers, he said. And it\u2019s created a technology that is revolutionizing the way businesses are built, allowing startups to develop money-making products quicker and with smaller teams, he said.\u00a0<\/p>\n Riggs said he\u2019s not worried about the money OpenAI is losing, seeing it as a necessary step to building its product and business. And he said he has no doubt that the company will find investors willing to continue to fund it, particularly in an IPO.<\/p>\n \u201cI think institutional investors, particularly, really are eager to have some level of exposure to this type of potentially high-risk, high-reward product,\u201d he said.<\/p>\n<\/p>\n
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