Some early investors in OpenAI are questioning the start-up’s $852 billion valuation, amid shifts in strategy that make it appear unfocused, according to a new report. The concerns have been amplified by the company’s pivot toward higher-margin enterprise sales, an area in which it trails behind competitor Anthropic, and by a series of abrupt project shutdowns that have left some backers uneasy.

Key facts

• OpenAI’s valuation stands at $852 billion (approximately £628 billion).
• Several early investors believe the company has become “deeply unfocused.”
• OpenAI is shifting toward enterprise sales and coding tools, directly competing with Anthropic.
• The company has shuttered its video generation tool Sora, scrapped plans for an “adult” chatbot, pared back an investment deal with Nvidia, and halted U.S. and UK data centre projects.
• An IPO valuation of $1.2 trillion or more would be needed to justify the latest funding round, according to one investor who backed both OpenAI and Anthropic.
• Sapphire Ventures’ president compared OpenAI to “the Netscape of AI,” a reference to the 1990s browser pioneer that was overtaken by Microsoft.

‘Deeply unfocused’

“You have ChatGPT, a 1 billion-user business growing 50-100 per cent a year, what are you doing talking about enterprise and code? It’s a deeply unfocused company,” an unnamed early backer of OpenAI told the report. This sentiment reflects a broader frustration among some investors who believe OpenAI is diluting its focus amid rapid expansion.

The company’s most recent developments have included a strong push into the enterprise market, specifically targeting large businesses with sales of its Codex coding tool. This puts OpenAI in direct competition with Anthropic, which has long been considered the leader in enterprise AI solutions. Anthropic’s Claude models have gained significant traction among corporate clients, and the company has built a reputation for safety and reliability that appeals to enterprise buyers.

One investor who has backed both OpenAI and Anthropic said that an investment into OpenAI’s most recent funding round would have to assume an IPO valuation of $1.2 trillion or more. That valuation has become more difficult to justify given the cheaper proposition of buying into Anthropic, which is currently valued at $380 billion. The investor added that Anthropic offers a more focused business model, with clear enterprise appeal and less diversification risk.

Project cancellations

OpenAI’s purchase of the tech talk show TBPN was also criticized by an OpenAI investor as “a distraction.” The company’s recent shifts have included shuttering its video generation tool Sora, which eliminated a $1 billion investment from Disney. The closure of Sora was a surprise, as the tool had been widely praised for its capabilities and had attracted significant media attention.

In addition, OpenAI scrapped plans for an “adult” chatbot, which had raised ethical concerns within the industry. The company also drastically pared back an investment deal with Nvidia, potentially limiting its access to GPU supply at a time when compute resources are critical for AI development. Furthermore, OpenAI halted plans to develop a $30 billion data centre in the UK and extended a site in Abilene, Texas, leaving its infrastructure expansion strategy in question.

These cancellations have led some analysts to question whether OpenAI is struggling with execution or simply rationalizing its portfolio. The company’s leadership has not provided detailed public explanations for the reversals, which has added to investor uncertainty. In a competitive landscape where speed and scale are paramount, any perceived indecisiveness can be costly.

Infrastructure lead

Despite the criticisms, OpenAI still holds a strong lead over Anthropic in procuring computing resources. The company has long-term agreements with major cloud providers and has secured access to advanced chips from Nvidia, even after paring back its investment deal. This infrastructure advantage is critical for training large-scale AI models and for deploying products at scale.

The company’s chief financial officer, Sarah Friar, said that its large recent funding round shows the confidence of investors. OpenAI has raised billions of dollars from a range of backers, including Microsoft, which has invested over $13 billion in the company. Microsoft’s support provides OpenAI with not only capital but also access to Azure cloud infrastructure and distribution channels.

Historical context and competitive dynamics

OpenAI was founded in December 2015 as a non-profit research organization with the goal of ensuring that artificial general intelligence benefits all of humanity. In 2019, it transitioned to a “capped” for-profit model to attract outside investment, and in 2020 it released GPT-3, a landmark language model with 175 billion parameters. The launch of ChatGPT in late 2022 transformed the company into a consumer phenomenon, reaching 100 million users within two months and sparking a global surge in generative AI adoption.

Today, OpenAI operates multiple revenue streams, including consumer subscriptions for ChatGPT Plus, enterprise offerings such as ChatGPT Enterprise and API access for developers, and specialized tools like Codex and Sora. The company has also partnered with major corporations across industries, from finance to healthcare, to integrate AI into their operations. However, this diversification has created complexity, and some investors worry that OpenAI is trying to do too much at once.

Anthropic, founded by former OpenAI researchers in 2021, has taken a more focused path. The company concentrates on AI safety and enterprise solutions, with its Claude models known for their nuanced reasoning and strong safety guardrails. Anthropic has raised significant funding from investors such as Google and Amazon, and its valuation has soared to $380 billion. The company’s revenue growth has been robust, and it has signed major contracts with enterprise clients, making it a formidable competitor.

Google, meanwhile, has been integrating its Gemini AI models into its cloud offerings and consumer products, leveraging its vast data and distribution network. Google’s DeepMind division has continued to push the frontier of AI research, and the company has committed substantial resources to AI infrastructure. For OpenAI, competing on multiple fronts—consumer, enterprise, and coding—requires relentless execution and significant capital.

The “Netscape of AI” comparison

Jai Das, president of investment firm Sapphire Ventures, who is not an investor in OpenAI or Anthropic, referred to OpenAI as potentially “the Netscape of AI.” Netscape was the browser darling of the late 1990s, known for its innovative products and rapid growth. However, Microsoft bundled its Internet Explorer browser with Windows, leveraging its monopoly to overtake Netscape, which was eventually bought by AOL. Das’s comparison highlights the risk that even a first-mover with strong brand recognition can be disrupted by better-resourced competitors or by a shift in market dynamics.

The comparison is not universally accepted, however. Proponents of OpenAI argue that the company’s consumer franchise is vastly stronger than Netscape’s was, and that its ChatGPT brand has become synonymous with AI itself. OpenAI also benefits from an entrenched ecosystem of developers and partners, and its models are used by millions of businesses worldwide. Moreover, OpenAI’s valuation, while high, reflects current revenue growth and future potential, not just speculative hype.

Still, the Netscape analogy resonates with some investors because of OpenAI’s strategic pivots and its increasing reliance on Microsoft. Microsoft has integrated OpenAI’s models into its Azure OpenAI Service, and the two companies have a symbiotic relationship. However, Microsoft is also investing heavily in its own AI efforts and could eventually become a competitor if it develops proprietary models. This potential conflict is a concern for investors who worry about OpenAI’s long-term independence.

Enterprise strategy and competition

OpenAI’s shift to enterprise sales is a logical response to the need for higher-margin revenue. Consumer subscriptions, while growing, are less profitable than enterprise contracts, which offer larger deal sizes and multi-year commitments. However, entering the enterprise market requires a different set of capabilities, including dedicated sales teams, compliance frameworks, and customer support. Anthropic has built these capabilities over several years and has established itself as a trusted provider for regulated industries such as banking and healthcare.

OpenAI’s Codex tool is aimed at software developers, offering AI-powered code generation and completion. This is a direct challenge to Anthropic’s Claude, which has also focused on coding tasks. The demand for AI coding tools is enormous, but competition is intense. Microsoft’s GitHub Copilot, powered by OpenAI’s models, competes with Amazon’s CodeWhisperer and other tools. By pushing Codex as a standalone enterprise product, OpenAI is entering a crowded field with uncertain differentiation.

Some investors argue that OpenAI should focus on its core consumer business, which has proven successful and has a massive user base. The reported 1 billion-user figure for ChatGPT suggests extraordinary reach, and growth rates of 50-100 per cent per year are exceptional. However, consumer AI services face high churn rates and require massive compute resources, which could undermine profitability. Enterprise contracts could provide more stable and predictable revenue, but they require time to build a sales pipeline.

Infrastructure and capital needs

AI models of OpenAI’s scale require enormous computing power. Training models like GPT-4 costs tens of millions of dollars, and inference costs add up as usage grows. OpenAI has addressed this by partnering with Microsoft Azure and by investing in custom chips, but the need for data centres is still pressing. The halting of the UK data centre project and the extension in Texas could be a sign of cost discipline or a signal of uncertain demand. Infrastructure expenses are a major concern for investors, as they could erode margins for years to come.

OpenAI’s funding round, reportedly at a valuation of $852 billion, suggests that major investors are still willing to commit capital. However, the investor who mentioned the $1.2 trillion IPO valuation requirement suggests that public market investors will demand substantial growth and profitability. If OpenAI can achieve that, it will likely need to successfully navigate the enterprise market and maintain its lead over Anthropic and Google.

Board dynamics and governance

Another layer of uncertainty is OpenAI’s governance structure. The company was originally a non-profit, and its board still holds significant control through a system that is designed to ensure safety and mission alignment. In late 2023, OpenAI faced a public crisis when CEO Sam Altman was briefly ousted by the board and then reinstated after a wave of staff protests. This episode raised questions about the company’s stability and decision-making processes.

The board’s focus on safety has sometimes conflicted with commercial pressures. While this hybrid model may help maintain ethical standards, it can also slow down strategy. Investors have expressed concerns that the board might make decisions that are not purely focused on maximizing financial returns. The “unfocused” criticism could, in part, be a reflection of this governance tension.

Moving forward

OpenAI remains one of the most influential companies in the technology industry, and its products have shaped how the world interacts with AI. The company’s leadership has repeatedly said that it is pursuing a multi-faceted strategy to achieve artificial general intelligence and to deploy it safely and beneficially. Whether that ambitious vision will translate into sustained investor returns remains an open question.

The criticisms voiced by early investors underscore the pressure OpenAI faces to demonstrate focus and profitability. With Anthropic gaining ground in enterprise, Google expanding its AI ecosystem, and rising competition from open-source models, OpenAI cannot afford to appear distracted. The next few quarters will be critical, as the company must justify its valuation, execute on its enterprise strategy, and build on its infrastructure advantages. How it navigates these challenges will likely determine whether it remains the leader in AI or becomes another cautionary tale of overexpansion.

Source:Silicon UK News