OpenAI's Existential Crisis: Are GPT 5.2 and a $1B Disney Deal Enough?

Ejaaz: OpenAI just shipped GPT 5.2, the new best model in the world. Ejaaz: And yet, why does it feel like they're still fighting for survival? Ejaaz: 80% of Vibe coding is done using Claude Anthropics model, and more people are Ejaaz: using Google's Gemini models versus ChatGPT. Ejaaz: So it begs the question, what's OpenAI even useful for? Ejaaz: In fact, this year alone, they're projected to lose $20 billion and only projecting

Ejaaz: to be profitable by 2030. That's five years from now. A lot can happen. Ejaaz: And on top of all of this, they have a $1.4 trillion bill to pay on compute and data center costs. Ejaaz: So whichever way you look at it, the walls seem to be closing in on OpenAI. Ejaaz: And Sam is feeling the pressure. He called in a code red two weeks ago, Ejaaz: which companies only really do when they're in crisis mode. Ejaaz: But all might not be lost.

Ejaaz: ChatGPT is still the number one AI app in the entire world. And just last week, Ejaaz: they signed a $1 billion deal with Disney to license their IP to create AI-generated video. Ejaaz: And rumors are amongst the grapevines right now saying that OpenAI may be IPO-ing Ejaaz: next year at a $1.2 trillion valuation, which will give them the much-needed Ejaaz: capital that they need to win. Josh: Yeah, in 2023 and 2024, the world was basically like, ChatGPT equals AI.

Josh: If you're using AI, you're using ChatGPT. Josh: In fact, most people off the street If you ask them what AI was, Josh: they would tell you it's ChatGPT. Josh: There is a complete and total domination of the marketplace by this company.

Josh: Up until this year this year the question has become Josh: not chat gpt does equal ai but like which ai Josh: do i use for which task there's not one ai that Josh: does everything anymore because they've kind of siloed themselves into these Josh: individual buckets where if you want to write code you don't go to chat gpt you Josh: go to anthropic if you want to create images you go to google and chat Josh: gpt is no longer the all-in-one app it's

Josh: a place where you go to solve a specific set of problems and like sticking with Josh: the war analogy because this is the game of thrones it's like open ai used to Josh: have the only aircraft carrier in town everyone had to come through them to Josh: use them but now everyone has an aircraft carrier and the differentiator really Josh: becomes like supply chains alliances Josh: distribution and your ability to build applications that create actual value

Josh: for users like us who want to use them so that takes us just to i guess 5.2 Josh: which is what we're going to talk about today that open ai just recently launched Josh: and it should give us some hints as to where the company is going as they try Josh: to fight this resisting force that's closing in around them from all ends.

Ejaaz: Yeah. So the resisting force comes in the form of Google's Gemini 3 Pro, Ejaaz: which released two weeks ago, and then Anthropics called Opus 4.5, Ejaaz: which is the frontier model when it comes to coding. Ejaaz: So really, when OpenAI released this model, people were looking at these two Ejaaz: competitors and seeing how it weighed up against it.

Ejaaz: And the answer, Josh, is really, really well. It technically beats Claude Opus Ejaaz: 4.5 encoding and it beats Gemini 3 Pro against a range of different generalized AI activities. Ejaaz: So technically, I think it is the best or number one model in the world. Ejaaz: And the reason why I'm kind of like a little uncertain about this is I just Ejaaz: feel like, to your point, they're gamifying towards benchmarks that don't really Ejaaz: matter or don't really apply to the real world.

Ejaaz: But there is one particular benchmark that I thought was really cool that it Ejaaz: excelled in, which was GDPVAL, which basically measures how GPT 5.2 performs Ejaaz: in real-world expert-level tasks. Ejaaz: So I'm talking about things that people do in work that professionalize in their work.

Ejaaz: And it was measured that in 70% of cases, Josh, Ejaaz: human experts would choose GPT 5.2's output and answer and the way that it deals Ejaaz: with that particular task versus an expert professional human that that's paid Ejaaz: hundreds of thousands of dollars a year which which kind of blew my mind and Ejaaz: that was the most valuable kind of takeaway um with gpt 5.2.

Josh: So chat gpt feels like it's stuck between a rock Josh: and a hard place where they're optimizing for these vanity metrics but the Josh: actual day-to-day experience for a lot of users like Josh: myself and you are just not really changing much Josh: the product has mostly stayed the same the models are getting better Josh: but the only difference that i notice is that the Josh: tick in the little top left corner goes from 5.0 to 5.1 and

Josh: now it says 5.2 but in terms of the actual outputs in terms Josh: of my experience using the platform not a whole lot has changed in Josh: addition to this they have tweaked the cost a little bit which is pretty pricey Josh: it's um 21 per million tokens in 168 per million tokens out so you're paying Josh: for a frontier model for sure and this is probably a result of them just using Josh: a tremendous amount of compute to optimize for these benchmarks,

Josh: which is bizarre because Sam Allman came out and said, this is a 390x cost reduction Josh: in a year, which is pretty remarkable and Josh: You really have to take a step back and appreciate what they've been doing, Josh: because a lot of the sentiment around OpenAI right now is fairly bearish in Josh: the sense that they have a lot of hard challenges they need to overcome in order Josh: to make this whole thing work.

Josh: But a 390 times cost reduction in anything in a year is pretty remarkable. Josh: And that's relative to, I believe, 03, which was, if you could believe this, Josh: it was released a year ago, which feels like an eternity ago. Josh: But it was literally not even 12 months ago. And since then, Josh: we've gotten, I mean, you could look at this Arc AGI chart, which is the benchmark Josh: that kind of everyone uses to gauge where these companies are on the path to AGI.

Josh: They've made such an incredible improvement. And that token that used to cost Josh: a dollar now costs, what is one four hundredth of a dollar, whatever that is, Josh: just a fraction of the cost. Josh: And these, I mean, these changes are remarkable. So even though we're being Josh: particularly bearish on OpenAI, you do have to admire the fact that this industry Josh: is advancing so quickly. Josh: And what cost $400 yesterday now cost $1 today for something that is far higher quality.

Ejaaz: All of that being said, Josh, I am not entirely sure that models are kind of Ejaaz: like the thing to optimize for, at least from a benchmarks perspective. Ejaaz: I think that OpenAI should be focused on one thing and one thing only that they Ejaaz: do really well, which is the consumer product mode.

Josh: And we have a deal based on this that has come into play over the last week, Josh: which is the Disney deal, the $1 billion deal that they inked with Disney in Josh: order to hopefully, I guess, make a little bit more of a mainstream splash. Josh: I guess the way you could describe it is if you can imagine Disney as a sneaker Josh: brand and Sora is the machine that could generate these unlimited custom shoes.

Josh: Until now, people were basically making these fake Nikes. And this is a big problem. Josh: There's a lot of these fake products that are reflective of the real thing, Josh: but lack in the quality. They're messy.

Josh: They're legally very sketchy. and then disney is finally coming Josh: and they're kind of capitulating they're like okay we're going Josh: to officially license the designs but we're going to set the rules and Josh: we're going to make sure that we get paid so our brand doesn't get wrecked Josh: so this very much feels to me like a hedge against the Josh: destruction that was already starting so now fans Josh: can go and they could generate short videos using disney characters or marvel

Josh: star wars whatever it is and then disney gets the opportunity to skin that the Josh: way they like put the guardrails in place and then disney also even offers plans Josh: to stream curated clips on disney plus so they're actually integrating this Josh: into their ecosystem so what you're seeing here Josh: And it is really funny. It's like they're letting you play with the characters, Josh: but not steal the actor's identity.

Josh: And this feels like a 180 from where they've stood previously, Josh: because you just from what I understand, they're simultaneously suing Google Josh: over like copyright infringement stuff. So they're saying, no, no, no, no. Josh: If we're going to play this game, we're going to play this on our terms. Josh: And they committed at least a billion Josh: dollars to open AI to form this relationship and to start doing it.

Josh: And to me, it feels interesting. And on the screen, we have a bear case, Josh: too, where it seems like they have just totally capitulated. Ejaaz: Yeah, effectively, what's being described here is, you know, Ejaaz: Disney, in his own words, Ejaaz: Disney is a $200 billion company sitting on only $5 billion worth of cash and Ejaaz: a $1 billion investment at a $500 billion valuation of OpenAI doesn't matter Ejaaz: to them at all on the upside case.

Ejaaz: And so if OpenAI is going to IPO at a $1 trillion valuation, that's just a 2x. Ejaaz: So it doesn't make any kind of meaningful dent or impact on Disney's profit line. Ejaaz: Where I think the real value is coming in here, Josh, is long-term. Ejaaz: If you can have endless amounts of content generation for Disney's IP without Ejaaz: Disney needing to spend money on really expensive animators and teams to produce the content.

Ejaaz: And, you know, animation takes like years to produce. Open Air can generate Ejaaz: it in a couple of minutes. Ejaaz: That is, it's kind of like free marketing. It's kind of like free PR and the Ejaaz: fans can make of it what they will without kind of Disney having to get their Ejaaz: hands dirty. So it kind of makes their IP endless.

Ejaaz: And if Disney ends up owning all of it, then great. Ejaaz: And in fact, as part of this deal, if I'm not mistaken, OpenAI gets exclusive Ejaaz: rights on the IP for a full year before Disney kind of reclaims IP access or Ejaaz: IP licensing on the AI generated content. Ejaaz: So they really see that OpenAI has some kind of advantage here and they were Ejaaz: able to strike a pretty sick deal.

Josh: Yeah. And the big boundary line is, is you can use the characters, Josh: but not the real performers, forces, faces or voices. Josh: So for me, this is exciting because I mean, imagine you were a kid. Josh: I always watched Disney Channel. I loved Disney Channel.

Josh: And there's a world in which you start to get a custom curated Disney Channel Josh: just for you, where you have the characters, you have a universe, Josh: but it's all hyper tailored to the stuff that you are most interested in.

Josh: And that seems exciting. It seems directionally Josh: correct in the sense that we're going to start leaning more into hyper Josh: custom content per person and disney's kind of leaning into that so props to Josh: them but that doesn't end our ai our open ai concerns for this week there there Josh: is more so as we were going through the financials we so we started to look Josh: in at them and they're losing a lot of money

Ejaaz: How much to the tune of 20 billion dollars 20 billion dollars yeah yeah.

Josh: Okay so they got 1 billion from disney so yeah they're exactly 120th of the way there Ejaaz: Right exactly and okay to give Ejaaz: them a few flowers 13 billion dollar annual recurring revenue is great right Ejaaz: but they're projected to be spending twice if not three times that amount of Ejaaz: money next year on data center costs alone josh so then you might be like well Ejaaz: they have paid subscribers right like so they should be fine.

Ejaaz: Well, 5% of the 800 million weekly active users that they have actually pay. So that's 40 million. Ejaaz: And of that percentage, I guess quite a large percentage of them are only the Ejaaz: 20 bucks a month subscribers. Ejaaz: So the point I'm trying to make here is the subscription model for OpenAI does not make sense. Ejaaz: In a world where it needs to make sense, I would guess they need to turn on advertisements.

Ejaaz: As soon as they do that, in my opinion, it's going to make the product experience Ejaaz: even worse, which will push people towards or back towards Google and Claude Ejaaz: to kind of use their models for free. Ejaaz: And Google has an endless amount of cash flow so that they don't really care about this, right? Ejaaz: Another crazy number is how much of their revenue they're losing to Anthropic.

Ejaaz: This year, Anthropic unseated them as the top enterprise AI model that is favored Ejaaz: by enterprises globally, a crown which OpenAI held for like a number of years prior to this. Ejaaz: So they're losing on that front as well. And then when it comes to just like Ejaaz: generally projecting their revenue, Josh, something that a number that they've Ejaaz: floated is, you know, by 2030, we'll have $200 billion worth of revenue.

Ejaaz: But what people aren't contemplating Ejaaz: is how much they're still measured to be losing in that same year, Ejaaz: which is around the same amount, if not a little bit more. Ejaaz: And of course, like these bar charts and stuff are all just estimates. Ejaaz: No one knows how this will actually end up transpiring, but it's worthy to think about. Ejaaz: But the final one is the $1.4 trillion worth of compute that they're projected Ejaaz: to spend over the next five years.

Ejaaz: And I actually want to come in here with a positive note, Josh, Ejaaz: because this is the biggest kind of debt on their balance sheet that people Ejaaz: kind of like bear about, right? They're saying like, hey, this is a really bad thing. Ejaaz: OpenAI is not going to be worth a lot of money because of this. Ejaaz: It's just a number. And it's just a clickbait number because it's not real.

Ejaaz: If you look into the contracts and the terms that they've signed with all these Ejaaz: cloud providers, they don't actually need to spend this amount of money. Ejaaz: It's just the most amount of money that they could potentially spend with these Ejaaz: cloud providers, with these compute providers.

Ejaaz: So realistically, if you look at the contractual deals for next year, Ejaaz: OpenAI just needs to spend up to $10 billion, which is a lot more feasible than Ejaaz: the $100 billion, which is contractually apparently all headlined to be for next year. Ejaaz: So there's a bit of fear mongering on social media about all of this stuff. Ejaaz: And I actually don't think the bear case is all that big for OpenAI. Ejaaz: In fact, I think it's quite bullish.

Josh: Yeah, here's the thing. It's like with episodes like this, it's fun to talk about the drama. Josh: It's fun to talk about the downswings. These are subtle nuanced changes that Josh: are happening on a much longer, smoother trajectory, which is up and to the right. Josh: And the reality is that OpenAI is one of the most remarkable companies on earth. Josh: They are shipping the best AI in the world. And it's fun to nitpick. Josh: It's fun to pick at the headlines.

Josh: But the reality is that these companies are printing tons of cash. Josh: They're spending more. So there are real concerns. But directionally, Josh: what we're seeing is this unbelievable progress, Josh: like 930 times cost reduction for a leading edge token over 12 months is so Josh: huge, especially considering that is one of many compounding factors. Josh: There's the cost per token, but there's also... Josh: Quality per token. And there is the cost per GPU, which has gone much lower.

Josh: And there's the product now that is significantly better than it was a year ago. Josh: And we're getting all these compounding growth things that... Josh: I'm watching this funny video on the screen. Ejaaz: What is this? Is this from Sora? It just shows you what they're good at, Josh. Ejaaz: It puts a smile on your face. People actually want to use and consume these products. Ejaaz: And I feel like people are focused too much on the benchmarks.

Ejaaz: They're focused too much on the numbers.

Ejaaz: But the fact is, if people want to use your product, you'll end up being a pretty successful company. Josh: You're watching this really funny video of a snowman snowboarding. Josh: And this was not possible even a year ago because video generation has gotten much better. Josh: And just last week, three days ago, actually, it was OpenAI's 10-year anniversary. Josh: They've been around for a decade, which is pretty amazing because up until when? 2021?

Josh: AI didn't even really exist in the consumer marketplace. So for six of those 10 years, Josh: nobody cared about open ai and then Josh: they released chat gpt 3.0 and that Josh: was the firing gun and the race started and now Josh: in the next four years the world has changed forever and open ai is Josh: very much responsible for that google had designed the Josh: transformer they had the architecture they did nothing with it for a really long time until

Josh: open ai came around and started the race and is Josh: now leading the race and will continue to be a prominent player where they stand Josh: on the scale of things i don't know their 90 of the pie they had is certainly Josh: going to go down but even if it drops down to 30 30 of this pie is an enormous Josh: number and it leaves me just feeling excited and optimistic i mean the other wild card too Josh: is that they have the hardware device incoming and no one else is really building

Josh: a dedicated hardware device with the world-class hardware designer. Josh: So that leaves something really excited to look forward to next year. Josh: But I think in terms of progress for this year, OpenAI had an unbelievable year Josh: and it's easy to talk down on it because relative to others, Josh: yeah, sure, they're losing some market share, but man, what a great company. What a great model.

Ejaaz: And that's our episode for today, folks. A lot of you have been commenting about Ejaaz: giving our opinion on OpenAI, the bull case, the bear case, and the fact that Ejaaz: a lot of these AI companies are going public next year. Ejaaz: You know, a lot of you from the investing angle are super curious. Ejaaz: We will continue to be putting out our thoughts and opinions and putting out Ejaaz: the facts as much as we can. We hope you enjoyed today's episode.

Ejaaz: If you enjoyed it, and if you enjoyed all of our other episodes, Ejaaz: we put out three or four, maybe even last week, Josh. Ejaaz: Go check them out, subscribe, put on notifications, give us a thumbs up, Ejaaz: give us a rating if you enjoy our content, and we will see you on the next one. Josh: See you guys.