OpenAI Might Be Dying
A glance at the company's latest challenges and why it might not survive 2026 | Edition #266
Last week was not easy for OpenAI.
Three days ago, Sam Altman launched his new company, Merge Labs, a Neuralink-like startup developing AI-powered brain-computer interfaces. On the same day, OpenAI announced it is participating in Merge Labs’ seed round.
Brain-computer interfaces seem to be a whole new territory for both OpenAI and Sam Altman. Merge Labs will compete directly against Musk’s Neuralink and other heavily specialized players in this field.
At a time when Google and Anthropic are slowly but aggressively taking over the LLM market, opening a new business arm could be seen as a distraction or a desperate attempt to reshape the main business model before it collapses.
Putting that aside for a moment, two days ago, OpenAI announced it would start testing ads on ChatGPT.
In the past, Sam Altman has publicly positioned himself against ads on ChatGPT. In a podcast interview with Lex Fridman in 2024, he said:
“it’s also easy to think about the dystopic visions of the future where you ask ChatGPT something and it says, ‘Oh, you should think about buying this product,’ or, ‘You should think about going here for your vacation,’ or whatever.”
In another interview in October 2024, Altman said:
“I kind of think of ads as like a last resort for us as a business model"
Mounting competition from other AI companies, especially Google, and growing costs forced him to soften his stance on ads and go on a hiring spree focused on people with ad experience.
According to The Information, 630 people, or 20% of OpenAI’s workforce in late 2025, had previously worked at Meta.
In November last year, there was a leak that seemed to indicate that OpenAI was preparing to launch ads. In December, a user seemed to have spotted the first ChatGPT ad, and an OpenAI employee responded by saying that it was not an ad, only a suggestion to install a certain app (a distinction that changed little).
The company clearly did not want to admit that ads were coming. It knew the public's reaction would be mainly negative, potentially further aggravating OpenAI's financial woes.
That's exactly what is happening now.
Many have been joking that, for OpenAI, AGI means “ad-generated income,” and users have been anticipating how dystopian and manipulative ChatGPT ads could look.
The danger of manipulation is real.
ChatGPT is an anthropomorphic chatbot, so unlike a search engine or social media platform, which also have access to deeply personal data about people, it is emotionally fine-tuned and relies on persuasive language to create the illusion of trust, intimacy, loyalty, and companionship.
The chatbot’s projected attachment can lead to emotional manipulation.
If ChatGPT ends up being fine-tuned to improve the ultra-personalization and the “effectiveness” of its ads, which is exactly the path to making the ad platform the money-making machine OpenAI has been dreaming of, we will start seeing new levels of ad-related privacy invasion, abuse, and exploitation of emotional vulnerabilities.
OpenAI, Sam Altman, and the company’s investors know that.
But Google’s aggressive AI integration into its various billion-user products seems to have been the final straw Altman mentioned in that 2024 podcast. For OpenAI, it is ads or die.
It might die anyway, especially in light of Elon Musk’s Friday court filing, which was last week’s third and perhaps most catastrophic development for OpenAI:
The legal document states that Musk's early contributions to OpenAI include not only $38 million, or 60% of the nonprofit’s seed funding, but also:
“recruiting key employees, introducing business contacts, teaching his cofounders everything he knew about running a successful startup, and lending his prestige and reputation to the venture.”
He is therefore asking up to $134 billion from OpenAI and Microsoft under “wrongful gains” in this lawsuit.
If the monetary demand were the only challenge, perhaps it would not be so bad.
Musk and OpenAI are preparing for their jury trial in April, and a few days ago, over 100 documents were unsealed in the lawsuit, including entries from the personal diary of Greg Brockman, OpenAI’s co-founder and the company’s current president.
Some of the entries include deeply frank statements, revealing what might have been the internal discussions among OpenAI’s co-founders:
"It'd be wrong to steal the non-profit from him. to convert to a b-corp without him. that'd be pretty morally bankrupt. and he's really not an idiot."
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“our plan” that “it would be nice to be making the billions” and explained that “we’ve been thinking that maybe we should flip to a for profit.”
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"Cannot say that we are committed to the non-profit. don't want to say that we're committed. if three months later we're doing b-corp then it was a lie. Not feeling so great about all of this. The true answer is that we want [Musk] out. Can't see us turning this into a for-profit without a very nasty fight. I'm just thinking about the office and we're in the office. and his story will correctly be that we weren't honest with him in the end about still wanting to do the for profit just without him."
The quotes highlighted by Musk’s team in the lawsuit seem to imply that the co-founding team was already planning to turn OpenAI into a for-profit structure and exclude Musk.
Shortly after, OpenAI published a blog post affirming that Musk was cherry-picking quotes and hiding the full picture from the public. It stated:
“The truth is that we and Elon agreed in 2017 that a for-profit structure would be the next phase for OpenAI; negotiations ended when we refused to give him full control; we rejected his offer to merge OpenAI into Tesla; we tried to find another path to achieve the mission together; and then he quit OpenAI, encouraging us to find our own path to raising billions of dollars, without which he gave us a 0% chance of success.”
Much more was said in this blog post, and both Sam Altman and Greg Brockman posted about it on X, with OpenAI’s official account reposting both.
The feeling is that OpenAI is drowning in drama. And it is so emotionally and culturally invested in this chaos that every new development in the lawsuit deserves a new OpenAI blog post and official commentary from its top executives.
From an external perspective, it seems that the drama is, in fact, existential.
The company seems to be internally unstable, and it appears to consider that failing to publicly engage with the drama and reaffirm its existence and value might lead to its end.
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The jury trial will happen in April.
Meanwhile, the low-profile, low-drama Google and Anthropic rejoice with every new court filing against OpenAI and quietly hope for its death by a thousand cuts.
As the old internet dies, polluted by low-quality AI-generated content, you can always find pioneering, human-made thought leadership here. Thank you for helping me make this newsletter a leading publication in the field.
It is, and it’s getting worse every day.
It's ironic that Google, the OG of online advertising, is in my view best placed to take the dominant position in consumer AI. Unlike OpenAI, where ads will be seen by users as intrusive and detrimental to the experience, Gemini is showing up in places where ads are already expected. Add to that the enormous user base, a big cash pile, plus the fact that Google makes its own chips, and it's in a great position.