How will OpenAI compete?

Everyone is actually underestimating stickiness. The near billion users OpenAI has is actually a real moat and might translate into decent chunk of revenue.

My wife, for example, uses ChatGPT on a daily basis, but has found no reason to try anything else. There are no network effects for sure, but people have hundreds and thousands on conversation on these apps that can't be easily moved elsewhere. Understandable that it would be hard to get majority of these free users to pay for anything, and hence, advertising seems a good bet. You couldn't have thought of a more contextual way of plugging in a paid product.

I think OpenAI has better chance to winning on the consumer side than everyone else. Of course, would that much up against hundreds of billions of dollars in capex remains to be seen.

I just wonder how long it'll take local models to be good enough for 99% of use cases. It seems like it has to happen sooner or later.

My hunch is that in five years we'll look back and see current OpenAI as something like a 1970's VAX system. Once PCs could do most of what they could, nobody wanted a VAX anymore. I have a hard time imagining that all the big players today will survive that shift. (And if that particular shift doesn't materialize, it's so early in the game; some other equally disruptive thing will.)

As far as I can tell Google Gemini has the best overall integrations (Android, WearOS, Google Home) with the only voice recognition that actually works (Gemini Live).

Anthropic Claude has the best integrations with coding; what would make sense is for them to focus on that segment.

Other AI companies don't have anything really compelling. Meta has a model that's fully open-source, but then that's not particularly useful outside of helping them remain somewhat relevant, but not market-leading.

I think this is the best article on open AI that I've ever read. A lot of content these days will try to paint OpenAI in sensational ways that really doesn't get to the bottom of whether open AI has an economic mode, and this article does a very thorough job of explaining why OpenAI doesn't have power like the other platforms.

And so this goes back to my theory that open AI's execution is basically to get it itself in a position where the market cannot afford to have it implode. Basically, it wants to or it needs to be too big to fail. And I think we're already kind of seeing the politicization, if you will, sort of the rocket race between two superpowers or large powers on the AI front, and I think that Might be a viable strategy.

My father uses ChatGPT extensively. My friend, whos an electrician, but has 0 things to do with computers, even called it Chat once and I said who? Because for me its ChatGPT. He also uses it extensively. Although I would bet they won't be willing to pay, advertisements will eventually hit them. And with inference prices going down, with distilled models being used, OpenAI will profit, and people will still hapily use it for whatever random queries they have. Exposure is the currency and OpenAI will have infinites of it for the foreseeable future.

I think this take underestimates a couple points:

1) the opportunities for vertical integration are huge. Anthropic originally said they didn’t want to build IDEs, then realized the pivot to Claude Code was available to them. Likewise when one of these companies can gobble up Legal, Medical, etc why would they let companies like Harvey capture the margins?

2) oss models are 6-12 months behind the frontier because of distillation. If labs close their models the gap will widen. Once vertical integration kicks off, the distillation cost becomes higher, and the benefit of opening up generic APIs becomes lower.

I can imagine worlds where things don’t turn out this way, but I think folks are generally underrating the possibilities here.

I speak native English and barebones high school Spanish. I recently visited Costa Rica and almost every time there was a language barrier issue (unknown word or phrase), the local folks opened ChatGPT, said what they were trying to say in Spanish and then had ChatGPT convert it to English. It was everywhere.

On the broader point, I think it's right to say that OpenAI has challenges. It simply has no differentiation beyond branding and arguably there are quite a few obvious ways it messed up and lost momentum (the board fight, trying to go in every direction at once etc.)

Today you have a phone in your pocket and you have apps on your home screen. Facebook is on your home screen, Whatsapp or X or Bluesky or whatever have a place on your home screen. Google basically is the safari app on iPhone. I don't know how many people have ChatGPT on their home screen. And soon, there will be some AI in your home screen from Apple (served by Google or another big hitter)that will be an incredible advantage.

That means OpenAI either needs to build up history with users very quickly and use that as stickiness before Apple nukes that distribution. Or they need to find a way of being another device that every living person has in their pocket.

Every attempt at doing that so far has been a comical failure and the way OpenAI are behaving makes me think their attempt will be no different.

If Codex 6.0 is better than Opus 4.9, things will flip. While OpenAI has too many common enemies and trying to box them into a consumer company, they are equally enterprise focused. They need to absolutely do well with foundation model - everything else depends on that.

Well there's the whole race to ASI thing. Whoever gets there first, the world is theirs. The thing will learn how learn, an intelligence feedback loop, make its own apps, find more efficient algorithms, deploy itself to more locations, bankrupt all competitors, embed itself in everyone's lives, and create a complete monopoly for the parent company that can never be touched. Until it goes rogue anyway.

(Aside, it's interesting how perceptions of these things have changed in one year: a whole article on OpenAI's future that makes no mention of AGI/ASI)

These very valid points apply to all companies trying to make money off of proprietary models, which means margins are going to collapse in a vicious price war that will make Uber vs Lyft seem tame.

As margins collapse capex will collapse. Unfortunately valuations have become so tied to AI hype any reduction in capex will signal maybe the hype has gotten ahead of itself, meaning valuations have gotten ahead of themselves. So capex keeps escalating.

None of this takes into account the hoarding effects at play with regards to GPU acquisition. It's really a dangerous situation the industry is caught in.

These sorts of doom articles are interesting in that they are from the perspective of tech company valuations. Why is this the important perspective?

For the humanity perspective, this doom is very optimistic. It says that these LLMs currently disrupting the platforms cannot themselves be the next platforms.

Maybe no one will have 'the ability to make people do something that they don't want to do' sort of power with this next stage in computing.

Sounds good to me.

I've churned off OAI in favor of maxing out Claude. Better coding model and less creepy engagement hacking in the chat interface.

”In browsers, the last successful product innovations were tabs and merging search with the URL bar.”

I see the point Ben is making even though there are a lot of nerdier innovations he’s skipping over — credential management, APIs (.closest!), evergreen deployments, plugin ecosystems, privacy guards, etc.

One aspect that model execution and web browsers share is resource usage. A Raspberry Pi, for example, makes for a really great little desktop right up until you need to browse a heavy website. In model space there are a lot of really exciting new labs working on using milliwatts to do inference in the field, for the next generation of signal processing. Local execution of large models gets better every day.

The future is in efficiency.

Open AI seems to be jack of all trades.i randomly use chatgpt for random questions, never for a serious task. They should check how anthropic is laserfocussed on coding and b2b segment.

ChatGPT is not OpenAI's product, it's the demo. The product is selling their technology to tens or hundreds of thousands of companies that embed it in e.g. customer support chat services.

I keep hearing about how the app integrations will be where the AI value is and then I see the actual app integrations and they are between useless and mildly helpful.

From what I can see Anthropic's big bet is that they will solve computer use and be able to act as an autonomous agent. Not so sure how fast they will progress on that. OpenAI on the other hand - I have no idea what they are planning - all I'm reading is AI porn and ads.

Google seems to be lackluster at executing with Gemini but they are in the best position to win this whole thing - they have so much data (index of the web, youtube, maps) and so many ways to capitalize on the models - it's honestly shocking how bad they are at creating/monetizing AI products.

Their existing users is an edge, but that's not much for the scale they're operating at. Users are lazy and even if you tell them "Gemini is 50 % better !" if ChatGPT isn't bad they won't switch.

I have only dabbled with Claude and other AI tools, but from what I can tell, only ChatGPT has folders and a robust organization system. (Someone correct me if I’m wrong here.)

This matters a lot to me, as I use AI as something of an ongoing project organizer, and not purely for specific prompts.

So at least for me, it would be a huge hassle to move to another platform, on par with moving from one note-taking software to another (e.g., Evernote to IA Writer.)

> The models have a very large user base, but very narrow engagement and stickiness, and no network effect or any other winner-takes-all effect so far that provides a clear path to turning that user base into something broader and durable.

I think this is clearly wrong. Users provide lots of data useful for making the models better and that is already being leveraged today. It seems like network effects are likely in the future too. And they have several ways to get stickiness including memory.

https://paulgraham.com/fundraising.html

I would love to dunk on this or something, but the lesson is that it's all about distribution.

Sama is really good at that, and also.. gotta give props for a lot of forward thinking like the orb, which now makes a lot of sense to me, as non-Apple/Google proof of personhood.

OpenAI lost the race to nerds' hearts. In the latest benchmarks, OpenAI is simultaneously cheaper (like 50% less?) and scores hire in coding and tool use benchmarks (GPT-5.3-Codex trounces Opus 4.6), yet all the coders want to marry Anthropic. I don't think OpenAI understands how to sell, if they even had a product to sell.

Great article, but I think this is a stretch: "nor does OpenAI have consumer products on top of the models themselves that have product-market fit."

I would argue chatgpt is in the top 10 products of all time with regard to product market fit.

> Every few weeks they leapfrog each other. There is variation within those capabilities, it’s possible to drop off the curve (Meta, for now) or fail to get onto it (Apple, Amazon, Microsoft, for now), or remain six months behind the frontier (China), or rely heavily on other people’s work (China, again)

I really dislike this narrative where it's always China = bad, and US companies = good.

These labs all copy from each other. OpenAI and Anthropic have "distilled" each other models too and routinely poach key researchers from competitors. Not only that, there's evidence Sonnet 4.6 has heavily distilled Deepseek R1 too, in fact, if you ask Sonnet 4.6 in Chinese who it is, it will tell you it's a Deepseek model.

Chinese are the only ones publishing papers on their models non stop.

The whole AI race is entirely based on blatant copyright infringements and copying each other.

> There is no equivalent of the network effects seen at everything from Windows to Google Search to iOS to Instagram, where market share was self-reinforcing and no amount of money and effort was enough for someone else to to break in or catch up.

What is the network effect of Google Search?

All they need to do is fund thousands of vibe coders to create apps and utilities for people using their model.

Like, why do I STILL have to do taxes and accounting with external tools? Why doesn't OpenAI have their own tax filing service for the people?

OpenAI should just drop their API service and build everything themselves. It's exactly what they did with ChatGPT. Build thousands of things, not just a few.

> what a platform really achieves is to harness the creative energy of the entire tech industry, so that you don’t have to invent everything yourself and massively more stuff gets built at massive scale

I hear this, but every time I look the platforms have captured another use case that the startup ecosystem built (eg images, knowledge summarization, coding, music).

The sector is already littered with the corpses of the innovators that got swallowed by the platforms’ aggressiveness to do it all.

> The one place where OpenAI does have a clear lead today is in the user base: it has 8-900m users.

There is no way that number is an accurate reflection of the number of actual human users of their service. I could believe they have 8-900m bot/fraud accounts in their databases, maybe, but not real users.

Same question for Atrophic.

Personally I only see Google (Gemini), X (Grok) and the Chinese models having a chances to still be alive in 1-2 years.

If you were forced to choose just one of all the competing players, which is "the one" you will use?

For me, the choice is ChatGPT, not for its Codex or other fancy tooling - just the chat. Not that Claude Code or Cowork is less important. Not that I like Codex over Claude Code.

sammy boy needs to pull a rockefeller and buy up all the competitors. Maybe that's what all these backroom deals about datacentre investment will amount to...

One trillion capex per year? Does that mean they need everyone on the planet to get $100/yr subscriptions to stay solvent? Without a monopoly? Or a product that most people use much?

It would be an unpopular opinion but I am here to say it:

OpenAI has the best model, that is how they are going to compete.

Their chatbot business could be in trouble, but Gemini needs a LOT of work to make it better to use too.

Coding wise, it has become very competitive. They need to sell better and sell aggressively

People underestimate the lead OAI has with their post-5.2 models. The author does not strike me as someone who closely follows the progress frontier labs make in US and around the world.

Not many folks talking about this: https://www.tomshardware.com/tech-industry/artificial-intell...

The WH has said it hasn't approved any sales, but it's not clear China is buying, and it seem they are making good progress on their huawei ascend chips. If China is basiclly at parity on the full stack (silicon, framework, training, model), and it starts open weighting frontier models at $0.xx/M tokens, then yeah, moat issues all around one would imagine? Not surprised to see Anthropic complaining like this: https://www.anthropic.com/news/detecting-and-preventing-dist... - but I don't know how you go back from it at this point?

This article is significantly better written than most anti-OpenAI/AI articles, and for that I am really grateful. I am generally an AI booster (lol), so I am happy to read well-considered thought pieces from people who disagree with me.

That being said...

> The one place where OpenAI does have a clear lead today is in the user base: it has 8-900m users. The trouble is, there’re only ‘weekly active’ users: the vast majority even of people who already know what this is and know how to use it have not made it a daily habit. Only 5% of ChatGPT users are paying, and even US teens are much more likely to use this a few times a week or less than they are to use it multiple time a day.

This really props up the whole argument, because the author goes on to say that OpenAI's users are not really engaged. But is "only" 5% of users paying of a 8-900M user base really so inconsequential? What percentage of Meta's users are paying? Google's? I would be curious to see the author dig deeper here, because I am skeptical that this is really as bad as the author suggests.

Moving on to another section:

> If the next step is those new experiences, who does that, and why would it be OpenAI? The entire tech industry is trying to invent the second step of generative AI experiences - how can you plan for it to be you? How do you compete with this chart - with every entrepreneur in Silicon Valley?

Er, are any of these startups training foundation models? No? Then maybe that is how you compete? I suppose the author would say that the foundation model isn't doing much for OpenAI's engagement metrics (and therefore revenue), but I am not sure I agree there.

Still, really good article. I think it really crystalizes the anti-OpenAI argument and it gives me a lot of interesting things to think about.

Tech companies are one of the jewels in America's (USA's) crown. If we build a bunch of huge AI companies, rivals will probably continue to release open AI models which undermine the US's influence in the world.

They have already succeeded. Never had a plan to compete.

Sometimes I like to imagine what this would be like if the technology had appeared 25 years ago.

First off, nonetheless open publishing stuff. Everything would have been trade secrets.

Next off no interoperable json apis instead binary APIs that are hard to integrate with and therefore sticky. Once you spent 3 or 4 months getting your MCP server setup, no way would you ever try to change to a different vendor!

The number of investors was much smaller so odds are you wouldn't have seen these crazy high salaries and you wouldn't have people running off to different companies left and right. (I know, .com boom, but the .com boom never saw 500k cash salaries...)

Imagine if Google hadn't published any papers about transformers or the attention paper had been an internal memo or heck just word2vec was only an internal library.

It has all been a net good for technological progress but not that good for the companies involved.

This is what they need to compete: https://www.cnx-software.com/2026/02/22/taalas-hc1-hardwired...

Demo: https://chatjimmy.ai/

For me Codex beats Claude.

I stopped reading once Evans emphasized consumer product. That was never a good strategy to sell SaaS, and I don't see how that changes.

This is confirmation bias. HN and other tech people are focusing on the programming aspect of AI more than anything else. The average user does not use it for that, and they don't care. ChatGPT became something like Kleenex.

Worth noting that it’s not a winner-takes all situation. There’s definitely space for differentiation.

Anthropic is in favor with developers and generally tech people, while OpenAi / Gemini are more commonly used by regular folks. And Grok, well, you know…

We have yet to see who’s winning in the “creative space”, probably OpenAI.

As these positionings cristallize, each company is likely going to double down on their user’s communities, like Apple did when specifically targeting creative/artsy people, instead of cranking general models that aren’t significantly better at anything.

Wasn't OpenAI's moat buying up all the RAM or Nvidia cards?

maybe openai is another docker.. and we are waiting for the 'k8s'

To say "except for distribution" OpenAI has few advantages is like saying "except for location" this retail store really doesn't stand a chance.

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