OpenAI is Dead

America’s AI Lead is Dying

OpenAI’s IPO is based on its dominance of a market it no longer dominates. Google’s Gemini is rapidly taking its place. It turns out Large Language Models (LLMs) are easily replaced. Close allies like Microsoft are quietly walking away.

This is just three months after it raised $122 billion in cash, based on a valuation of $875 billion. In total, it is burning through $180 billion. For what?

But that’s not the worst part. The Administration’s decision to kneecap Anthropic, banning its export, means its software can’t be trusted either, by users outside the U.S. Trump’s moves to invest in the companies, which is seen by the media as a way for ordinary Americans to get in on the action, is also a signal to customers the world over that the U.S. government will have a veto over development.

So where is Microsoft looking as it seeks to create a long-term runway for CoPilot, its struggling AI system? China’s DeepSeek. It’s not that Satya Nadella loves China’s government, or the software. It’s cheap, open source, and reliable.

Every technology goes through this dance. Innovation only offers a short-term lead. In the longer run, innovation must get buried in the stack, at low cost, making money available for the next innovation. This has always been the advantage of open source. By giving people control of the code, and by putting more hands on the code, it can in time replicate what any proprietary system does, and allow it to be buried in the stack, without the rent of proprietary software.

AI is moving faster than other software revolutions. That means this process is moving faster, too.

Our Chinese Overlords

Because Chinese LLM software is open source, it can’t be seized or turned off by government policymakers. American software, whether owned or just controlled (through export controls) by the U.S. government, can be turned off.

If you have a business in Asia, Africa, Europe, or South America, which software are you going to build your business on? In this case it doesn’t matter whether DeepSeek, or Qwen, or any of the other Chinese players, has feeds and speeds comparable to OpenAI or Anthropic.

I invested in Alibaba recently, for my retirement account. Not a lot, just a taste. It’s underwater. I’m losing money. After a run-up last fall, it’s basically made a round-trip over the last 12 months, its market cap of $266 billion a tiny fraction of American competitors. This isn’t an isolated incident. China’s government wants to dominate AI, but that’s not the same as wanting its AI investors to get rich at the expense of the government. It is taking a slow approach to software, based on open source, and a measured approach to data center investment. Its $300 billion data center budget covers five years. Amazon has already spent $100 billion this year alone.

We’re Tigger. They’re Pooh. Guess who is getting the hunny?