OpenAI declares "Code Red" -- Impact on the AI Stocks

December 2, 2025

Up until very recently, ChatGPT was seen as the AI leader in the large-language-model space. However, Google recently released the latest version of its Gemini AI model. And the results seem to indicate that Gemini has lapped ChatGPT in most categories.

This has not gone unnoticed at OpenAI. Both the Wall Street Journal and Financial Times had front page articles this morning about the “red alert” happening at OpenAI.   CEO Sam Altman has called an emergency shift in priorities due to recent improvements at competitors - not just Gemini, but also Anthropic’s Claude.

Altman has put a hold on new products, such as advertising and shopping in AI.  The focus now is on remaking ChatGPT the market leader.  This is a dramatic shift from merely two months ago when OpenAI was making hundreds of billions in spending commitments to other large tech companies.  

In the last couple months alone, OpenAI announced a $300 billion long-term deal with Oracle (which initially shot the stock higher, although it has fallen lower since).  They also signed large deals with Broadcom, AMD, Amazon, Coreweave, Cisco, and others.  

This type of headline will only add to the general uneasiness about the sustainability of the AI growth expectations built into the market. However, the clear beneficiaries are Google and Broadcom (who are partnering together).

Someone over the weekend asked me if AI was in a bubble.  With only a few exceptions, the main AI stocks’ valuations do not appear to be in a bubble.  Now, they’re definitely above the market average.  But they are reasonable if the current growth rates keep up.   And "will the growth continue" is really the main question. That question is harder to answer.