A growth fund GP frames the market's intense scrutiny of OpenAI's slowing growth as "anxiety displacement." With the market being up for a long time and broader societal anxieties, negative focus on a high-performing company like OpenAI becomes an outlet for unrelated fears.
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Widespread anxiety from founders before OpenAI's Developer Day highlights a key challenge for AI startups. The fear is not a new competitor, but that the underlying platform (OpenAI) will launch a feature that completely absorbs their product's functionality, making their business obsolete overnight.
Unlike previous technologies like the internet or smartphones, which enjoyed years of positive perception before scrutiny, the AI industry immediately faced a PR crisis of its own making. Leaders' early and persistent "AI will kill everyone" narratives, often to attract capital, have framed the public conversation around fear from day one.
Initially viewed as a growth driver, Generative AI is now seen by investors as a major disruption risk. This sentiment shift is driven by the visible, massive investments in AI infrastructure without corresponding revenue growth appearing in established enterprise sectors, causing a focus on potential downside instead of upside.
The rhetoric around AI's existential risks is framed as a competitive tactic. Some labs used these narratives to scare investors, regulators, and potential competitors away, effectively 'pulling up the ladder' to cement their market lead under the guise of safety.
OpenAI has a strategic conflict: its public narrative aligns with Apple's model of selling a high-value tool directly to users. However, its internal metrics and push for engagement suggest a pivot towards Meta's attention-based model to justify its massive valuation and compute costs.
Michael Burry's comparison of OpenAI to Netscape is apt regarding market share erosion due to intense competition. However, the AI market is expanding exponentially. Unlike the browser market of the 90s, OpenAI can lose market share percentage yet still see massive absolute revenue and usage growth.
The startup landscape now operates under two different sets of rules. Non-AI companies face intense scrutiny on traditional business fundamentals like profitability. In contrast, AI companies exist in a parallel reality of 'irrational exuberance,' where compelling narratives justify sky-high valuations.
After facing backlash for over-promising on past releases, OpenAI has adopted a "low ball" communication strategy. The company intentionally underplayed the GPT-5.1 update to avoid being "crushed" by criticism when perceived improvements don't match the hype, letting positive user discoveries drive the narrative instead.
Despite its massive user base, OpenAI's position is precarious. It lacks true network effects, strong feature lock-in, and control over its cost base since it relies on Microsoft's infrastructure. Its long-term defensibility depends on rapidly building product ecosystems and its own infrastructure advantages.
The current market is unique in that a handful of private AI companies like OpenAI have an outsized, direct impact on the valuations of many public companies. This makes it essential for public market investors to deeply understand private market developments to make informed decisions.
