Can AI industry survive if OpenAI collapses?
What's the story
Ed Zitron, an AI critic and researcher, has warned that the ongoing boom in artificial intelligence (AI) is largely driven by OpenAI. He argues that if this company collapses, it could be as catastrophic as the Lehman Brothers collapse during the 2008 financial crisis. Zitron said, "OpenAI is the reason anyone cares about AI," adding that without it, "the justification for trillions of dollars of capex evaporates."
Financial hurdles
Zitron raises concerns about OpenAI's profitability
Zitron said that the profitability of large language models (LLMs) is a major concern for OpenAI.
He argued that the company's heavy spending on AI infrastructure isn't matched by its subscription and ad revenue.
While there may be billions left to raise for building this infrastructure, he stressed that "OpenAI needs tens of billions of dollars multiple times a year."
Market dynamics
Free users becoming a liability
OpenAI's free users have become a major liability, according to Zitron.
According to a report from The Information, the company would earn $2.4 billion in ad revenue in 2026 and $102 billion by 2030.
However, eMarketer estimates the entire AI chatbot advertising market will only make $1 billion this year and $5.41 billion by 2030.
Industry implications
Dire consequences for AI industry if OpenAI collapses
Zitron warned that if OpenAI collapses, it could have dire consequences for the entire AI industry.
Without OpenAI, investors would see AI labs as financial black holes. Most AI start-ups are just repackaging existing models without making a profit.
He added that OpenAI's failure wouldn't just shake the AI industry, it could rattle the entire stock market.
Tech impact
Oracle, NVIDIA, and Microsoft are exposed to this risk
Viram Shah, founder and CEO of Vested Finance, told LiveMint that Oracle is most exposed to OpenAI's potential failure.
A big chunk of its future cloud revenue rides on a large contract with the company.
NVIDIA and Microsoft are also closely tied to OpenAI as investors and suppliers. However, Shah noted that they have other customers so their businesses aren't entirely dependent on it.