OpenAI CEO Sam Altman issued a 'code red' memo bracing employees for 'rough vibes' and economic headwinds due to increased competition. Altman announced a temporary postponement of initiatives aimed at helping OpenAI break even by 2030, including delaying major revenue generators like advertising, expanded e-commerce, and agentic systems. Despite these challenges, OpenAI is not in a life-threatening crisis, with ChatGPT topping Apple's App Store as the most downloaded free app in the U.S. in 2025 and a $1 billion partnership with Walt Disney Co.
Competitive pressures are mounting as Google's Gemini gains ground on ChatGPT in user metrics and enterprise market share. ChatGPT has over 800 million weekly users, but Google's Gemini is gaining fast with 650 million monthly active users as of Q3, up from 450 million in July. Preliminary November data shows Google Gemini generated 1.351 billion website visits, a 14.3% increase from October, while ChatGPT fell to 5.844 billion visits, marking its second month-over-month decline in 2025. In the enterprise market, OpenAI's market share fell to 27%, while Gemini rose to 21% and Anthropic leads at 40%, according to a Menlo Ventures report.
OpenAI disputes the Menlo Ventures figures, noting that Menlo is an investor in Anthropic, and says over 1 million business customers use OpenAI tools with sharp upticks in usage metrics over the past year. OpenAI released a survey showing enterprise usage of its models more than doubled over the past year in many countries outside the U.S.
Political and security developments have further complicated the landscape, with President Trump ordering the U.S. government to stop using Anthropic's products and the Pentagon designating Anthropic a national security risk. Hours after Trump's announcement, OpenAI said it struck a deal with the Defense Department to provide AI technology for classified networks. Trump announced a six-month phaseout of Anthropic's products.
The dispute between Anthropic and the Pentagon involved a military contract worth up to $200 million and whether Anthropic could prohibit its tools from being used in mass surveillance or autonomous weapon systems. Defense Secretary Pete Hegseth designated Anthropic a supply chain risk to national security, blacklisting it from working with the U.S. military or contractors, with a six-month transition period.
Anthropic said it would challenge the supply chain risk designation in court, calling it legally unsound and a dangerous precedent. Anthropic challenged Hegseth's statement that contractors must cut off all business with Anthropic, saying he lacks statutory authority and the designation only applies to Department of War contracts.
The company moved too quickly on an agreement that raises questions about surveillance and autonomous weapons.
Amid these external pressures, OpenAI is planning a strategic shift to focus more on coding and business users, with top executives discussing this in an all-hands meeting. OpenAI has declined to comment on the strategic shift, and staff are expected to be notified of changes in the coming weeks.
OpenAI is facing backlash after striking a controversial agreement with the Pentagon to deploy AI systems across U.S. national security operations. Caitlin Kalinowski, a senior leader who headed OpenAI's robotics division, resigned over the Pentagon deal.
Contextually, OpenAI's current strengths persist despite these challenges, including ChatGPT's app popularity and the Disney partnership, which provide a buffer against immediate financial strain.
The implications of the Pentagon deal remain uncertain, with unknowns about the specific AI technology OpenAI is providing to the Pentagon under the classified networks deal and the exact ethical safeguards in place.
The implications of OpenAI's strategic shift are also unclear, as deprioritized areas could affect research directions and product development, potentially altering the company's broader impact on the AI industry.
Meanwhile, the implications of Anthropic's legal challenge hinge on its outcome, which may influence how other AI firms negotiate contracts with government entities and assert ethical boundaries.