OpenAI CEO Sam Altman has circulated an internal memo highlighting challenges for the company amid rapid developments in artificial intelligence by competitors such as Alphabet Inc (NASDAQ:GOOG)’s Google.
The memo, reportedly drafted before the launch of Google’s Gemini 3, noted that recent progress at Google could create “temporary economic headwinds” for OpenAI, though Altman highlighted that the company is “catching up fast.”
The memo described ongoing challenges scaling OpenAI’s models using traditional pre-training methods and outlined new initiatives, including reasoning-focused AI models and a strategic project codenamed “Shallotpeat.”
Altman acknowledged that competitors, including Google and Anthropic, are narrowing the gap in the AI race, while reaffirming OpenAI’s long-term focus on pursuing artificial superintelligence and automating AI research to accelerate innovation.
OpenAI has also expanded its cloud partnerships beyond Microsoft to include providers such as Oracle, aiming to manage infrastructure costs and reduce reliance on a single partner.
The memo noted that commitments to cloud infrastructure, combined with competition from Google and other emerging firms, could affect short-term financial projections.
Wedbush analysts noted that while OpenAI faces “rough vibes” and financing pressures, the company’s executives remain confident in emerging as a leader in AI.
The analysts highlighted that the focus in the industry is increasingly on inference applications that generate revenue, rather than model supremacy alone.
Further, they wrote that investments supporting large-scale AI infrastructure, such as Meta’s $27 billion Louisiana data center financed largely through Blue Owl Capital, illustrate broader trends in AI funding and capital allocation.
“Our view continues to be any credit concerns are unlikely to manifest over the next few quarters, and certainly aren't affecting the hardware supply chain today, but remain a longer-term potential concern, particularly if revenues/profits don't accelerate,” they wrote.