OpenAI is experiencing an absolutely terrible week.
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OpenAI is experiencing an absolutely terrible week.
Apple Sues, Oracle Rating Downgraded, Price War Begins.
Navigating Web3 tides with focused insightsAuthors: Scott Galloway & Ed Elson
Compiled by: TechFlow
TechFlow Editor's Note: Apple lawsuit, Oracle rating downgrade, price war begins—OpenAI is experiencing its worst week in history. What's worse, if all these risks materialize, its 2030 revenue forecast could plummet by 70%, and cash flow losses will reach $165 billion. Will this AI giant valued at hundreds of billions become the largest tech bubble in history?
OpenAI May Fail to Achieve 70% of 2030 Revenue Forecast, Here's Why
For OpenAI, this is another terrible week. The company was exposed for selling advanced AI models to Chinese companies on the Pentagon's blacklist, its first AI device leaked (allegedly a movable speaker), and according to Emarketer's latest forecast, OpenAI's advertising business is expected to be 95% less than its own predictions.
And that's not all. Apple sued OpenAI last week, alleging its consumer hardware plan is the product of stolen intellectual property. S&P Global Ratings also downgraded Oracle's debt to BBB-, just one notch above junk status, citing OpenAI as a "critical credit risk." Additionally, DeepSeek is reportedly preparing for an IPO, possibly filing as early as this year. A cheaper Chinese AI model provider successfully listing could make it harder for OpenAI and Anthropic to attract funding.
Taken together, these issues raise questions about whether OpenAI can achieve its revenue forecasts and fulfill contract obligations worth hundreds of billions of dollars signed with computing power suppliers and chip companies.
First, Apple's lawsuit could stall OpenAI's entire hardware business. Apple accuses OpenAI of poaching over 400 Apple employees, extracting confidential information from them, and then deceiving Apple's suppliers into doing proprietary work for OpenAI without permission. Apple is requesting monetary damages from the court and an order for OpenAI to return or destroy all misappropriated property.
Second, the AI price war has begun, with Chinese companies like DeepSeek being the biggest threat. Open-source Chinese models now account for nearly 50% of enterprise token usage on OpenRouter (an AI model marketplace). In the first half of 2025, this proportion was only 4.5%.
In response, U.S. companies are significantly cutting prices. Last week, Meta announced the launch of new model Muse Spark 1.1, priced 75% cheaper than OpenAI and Anthropic. Under industry pressure, OpenAI released a model 80% cheaper than its own.
In the worst-case scenario, if Apple's lawsuit shuts down OpenAI's hardware business, ChatGPT advertising revenue is as sluggish as EMarketer predicts, and the price war forces OpenAI to reduce model pricing by 80%, then OpenAI's 2026 revenue will decline by 40%, and 2030 revenue will decline by 70%.
For a company that can only cover about 80% of cash burn in an ideal scenario by 2030, this situation would be catastrophic.
This will also affect when OpenAI achieves positive cash flow. According to internal forecasts, OpenAI will achieve positive cash flow in 2030. But in this downside scenario, it would instead lose $165 billion that year.
OpenAI CEO Sam Altman tried to soothe investor concerns with a tweet, but his statement ultimately just promised to "do the right thing." Whatever that means.
The best business model in history is stealing intellectual property. The second best is: providing 80% of the product's value at half the price. This is exactly what DeepSeek and other Chinese open-source weight models are trying to do now.
The U.S. has placed a huge bet on AI, while China has just produced a product close to the frontier level at a fraction of the cost. Once Trump figures out what's happening, this will become the next geopolitical football.
The Market Isn't Broadening—It's Just Getting Better at Hiding AI
Investors keep hearing that the stock market is broadening. But is it really? The deeper you look, the harder it is to argue that stocks, bonds, and even alternative assets are not now a big bet on AI.
This pattern is most evident in the stock market. AI-related stocks account for more than 50% of the S&P 500 index by weight; if AI and energy were excluded from the S&P 500 this year, the S&P 500 would be negative.
AI is the hidden catalyst driving returns in seemingly unrelated sectors. For example, 3 of the 4 best-performing companies in the S&P 500 real estate sector are Real Estate Investment Trusts (REITs) focused on developing AI data centers.
Utility companies are benefiting from AI's soaring electricity demand. U.S. electricity demand jumped to a record high last year, with data centers accounting for about 50% of the demand growth.
Industrial stocks have surged due to construction demand for building AI data centers. In fact, for the first time since 2021, the forward P/E ratio of S&P 500 industrial stocks (26x) is higher than that of technology companies (24x).
The financial sector also relies on AI. Big banks are collecting record fees from AI company IPOs and M&A activities, as well as generating record trading revenue from market hype surrounding AI. Robert Armstrong of the Financial Times even wrote: "It is not an exaggeration to summarize: big banks are now direct AI investment targets."
Even 52% of the Russell 2000 small-cap index's return in the first half of this year came from AI-related companies.
Emerging markets are no exception. South Korea and Taiwan account for 75% of emerging market returns, with most of these gains coming from three AI semiconductor chip suppliers: TSMC, Samsung, and SK Hynix.
In Europe, just 9 AI winners account for about 47% of this year's Stoxx Europe 600 index returns.
Apollo Chief Economist Torsten Slok concisely clarified the implication of this dependency: "This AI thing better work."
Real Estate Investment Trusts (REITs) are companies that own, operate, or finance real estate—apartment buildings, hotels, or increasingly, data centers. Many REITs trade publicly like stocks, so buying a share means buying into a professionally managed real estate portfolio. REITs are required to distribute at least 90% of annual taxable income as dividends to shareholders.
CNBC experts hold stocks, so they will always find reasons for why others should buy more stocks. But don't be fooled: the market isn't broadening; it just found a new way to buy Nvidia.
Everything is turning into AI stocks. This isn't necessarily bearish, but investors deceive themselves by calling it "broadening," as if it means diversification away from AI. It is not. Buying "AI-adjacent stocks" and calling it broadening is like ordering a Diet Coke with a Double-Double burger at In-N-Out. Let's be clear: you still bought a cheeseburger.
Among big tech companies, who relies least on AI? Apple. Apple's stock price rose 60% over the past year, just surpassing Nvidia to become the world's most valuable company again. Amazon, still AI-related but more diversified than other hyperscale cloud providers, rose 11% over the past year. Microsoft, the core stronghold of AI, fell 23%.
If I could go long a basket of stocks, it would be GLP-1. If I could short one, it would be AI. But to be clear: I am not telling you to hold gold bars or cash. I am always in the market—you never know how fast or how irrationally it will run. But you should understand how large the market's real exposure to a sector is.
I am a loyal fan of index funds and passive investing: put the money in and let the market do the work. But now we must ask what true diversification actually means. Putting money into the S&P 500 no longer does that job, which means you must start doing some homework.
The question is: Can you find sectors truly away from AI?
I will point out one sector: Healthcare. This was one of my picks at the beginning of the year, and I stand by this view. AI has not touched it yet—meaning real returns may still be ahead. But finding these sectors is the difficult problem investors now face.
Netflix Engagement Slides, Competitive Pressure Increases
Netflix reported disappointing second-quarter earnings. Revenue growth was 13%, below expectations, and the streaming giant released weak engagement data, subsequently announcing it would reduce the frequency of publishing engagement metrics, which unsettled investors. The stock price fell 8% at one point on Friday.
Netflix once boasted about its transparency; now, this claim seems quite ironic. In the first quarter of 2025, Netflix stopped reporting quarterly subscriber numbers, telling investors they should focus on engagement. Last week, the company decided to reduce the What We Watched engagement report from twice a year to once a year starting in 2027.
The last semi-annual engagement report looked weak. Total watch time grew only 2%, while the subscriber base is estimated to have grown 10%, meaning per-subscriber daily engagement declined by 8%.
Netflix has been facing increasingly fierce competition from short-video providers (especially YouTube). In response, it added "Clips," a TikTok-style scrolling feature surfacing short content from its own library, struck video podcast deals with Spotify and Barstool, and reached new licensing agreements with external publishers (BuzzFeed, Condé Nast) to bring new short-form video content to the platform.
Netflix lost over $250 billion in market cap over the past year, while fellow streaming giant Disney lost nearly $50 billion. Both are well-managed companies, with revenue and subscribers growing, and prices rising—yet they are being punished for it. This raises an important question: Is streaming just a bad business? Or have Netflix and Disney run out of creativity? Tell us your thoughts in the comments.
In the next six months, OpenAI will acquire enterprise AI company Sierra and appoint Bret Taylor as CEO. Sam Altman will be promoted to Chairman. Altman is an innovator, not an operator, while Bret Taylor is likely the best enterprise software operator of his generation.
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