OpenAI’s Darkest Week: Apple Lawsuit, Oracle Downgrade, AI Price War

Original Authors: Scott Galloway & Ed Elson

Original Translation: TechFlow

Introduction: Apple's lawsuit, Oracle's credit rating downgrade, and the outbreak of a pricing war—OpenAI is having its worst week ever. Compounding this, if all these risks materialize, its 2030 revenue forecast could plummet by 70%, and its cash flow loss could reach $165 billion. Could this $100 billion AI giant be the biggest tech bubble in history?

Here's Why OpenAI May Miss 70% of Its 2030 Revenue Forecast

It's been another terrible week for OpenAI. The company was reportedly caught selling advanced AI models to Chinese companies on the Pentagon's blacklist. Its first AI device was leaked (reportedly a portable speaker). And according to the latest forecast from Emarketer, OpenAI's advertising business might be 95% smaller than its own projections.

But that's not all. Apple sued OpenAI last week, accusing its consumer hardware plans of being the result of stolen intellectual property. S&P Global Ratings also cut Oracle's debt to BBB-, just one notch above junk status, citing OpenAI as a "key credit risk." Furthermore, DeepSeek is reportedly preparing for an IPO, possibly filing as early as this year. The successful listing of a cheaper Chinese AI model provider could make it harder for OpenAI and Anthropic to attract funding.

Taken together, these issues raise questions about whether OpenAI can meet its revenue forecasts and fulfill its hundreds of billions of dollars in contractual obligations with computing power providers and chip companies.

First, the Apple lawsuit could bring OpenAI's entire hardware business to a standstill. Apple alleges that OpenAI poached over 400 Apple employees, extracted confidential information from them, and then tricked Apple's suppliers into doing proprietary work for OpenAI without authorization. Apple is seeking monetary damages and a court order for OpenAI to return or destroy all stolen property.

Second, the AI price war has already begun, with Chinese companies like DeepSeek posing the biggest threat. Open source Chinese models now account for nearly 50% of enterprise token usage on OpenRouter (an AI model marketplace). This figure was just 4.5% in the first half of 2025.

In response, US companies are slashing prices. Last week, Meta announced the launch of its new model, Muse Spark 1.1, which is 75% cheaper than models from OpenAI and Anthropic. Under industry pressure, OpenAI released a model that is 80% cheaper than its own previous offerings.

In a worst-case scenario—if the Apple lawsuit shuts down OpenAI's hardware business, ChatGPT advertising revenue falters as EMarketer predicts, and the price war forces OpenAI to reduce model pricing by 80%—OpenAI's revenue could drop by 40% in 2026 and by 70% in 2030.

For a company that, in an ideal scenario, can only cover about 80% of its cash burn by 2030, this situation would be catastrophic.

This would also impact when OpenAI turns cash flow positive. Based on internal forecasts, OpenAI was expected to be cash flow positive by 2030. However, in this downside scenario, it would instead suffer a loss of $165 billion that year.

OpenAI CEO Sam Altman attempted 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? Delivering 80% of a product's value for half the price. This is precisely what DeepSeek and other Chinese open-source weight models are now trying to do.

The US has placed a massive bet on AI, while China has just produced a near-frontier product at a fraction of the cost. Once Trump figures out what's happening, this will become the next geopolitical football.

The Market Hasn't Broadened—It's Just Getting Better at Hiding AI

Investors have been hearing that the stock market is broadening. But is that really the case? The deeper you look, the harder it is to argue that stocks, bonds, and even alternative assets aren't now a massive bet on AI.

This pattern is most evident in the stock market. AI-related stocks account for over 50% of the S&P 500 on a weighting basis. If you strip out AI and energy from the S&P 500 this year, the index would be negative.

AI is the hidden catalyst driving returns in seemingly unrelated sectors. For example, 3 of the top 4 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 the surge in electricity demand driven by AI. US electricity demand jumped to an all-time high last year, with data centers accounting for about 50% of the growth in demand.

Industrial stocks are soaring 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 (26 times) is higher than that of tech companies (24 times).

The financial sector also relies on AI. Big banks are raking in record fees from AI company IPOs and M&A activity, as well as record trading revenue from the market frenzy surrounding AI. The Financial Times' Robert Armstrong even wrote, "It's not an exaggeration to say that big banks are now direct AI investment vehicles."

Even the Russell 2000 small-cap index saw 52% of its first-half returns this year coming from AI-related companies.

Emerging markets are no exception. South Korea and Taiwan account for 75% of emerging market returns, with most of those gains coming from three AI semiconductor chip suppliers: TSMC, Samsung, and SK Hynix.

In Europe, just 9 AI winners account for roughly 47% of the Stoxx Europe 600 index's returns this year.

Apollo Chief Economist Torsten Slok succinctly explained the implication of this dependence: "This AI stuff had better work out."

A real estate investment trust (REIT) is a company that owns, operates, or finances 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 their annual taxable income to shareholders as dividends.

The experts on CNBC own stocks, so they'll always find reasons why others should buy more stocks. But don't be fooled: the market is not broadening; it has just found new ways to buy Nvidia.

Everything is turning into an AI stock. This isn't necessarily bearish, but investors fool themselves by calling it "broadening," as if it implies diversification away from AI. It doesn't. Buying an "AI-adjacent stock" and calling it broadening is like ordering a Double-Double burger with a Diet Coke at In-N-Out. Let's be clear: you're still buying a cheeseburger.

Among the big tech companies, which one is least dependent on AI? Apple. Apple's stock has risen 60% over the past year, surpassing Nvidia again to become the world's most valuable company. Amazon, still AI-related but more diversified than other hyperscale cloud providers, is up 11% over the past year. Microsoft, the core battleground for AI, is down 23%.

If I could go long on a basket of stocks, it would be GLP-1s. If I could short one, it would be AI. But to be clear, I'm not telling you to hold gold bars or cash. I'm always in the market—you never know how fast or irrationally it can run. But you should understand the market's true exposure to one sector.

I'm a huge fan of index funds and passive investing: put your money in and let the market do the work. But now we have to ask what true diversification really means. Putting money into the S&P 500 no longer does that job, which means you have to start doing some homework.

The question is: can you find sectors truly away from AI?

I'd point to one sector: healthcare. It was one of my picks at the start of the year, and I'm sticking with that view. AI hasn't touched it yet—which means the real returns might still be ahead. But finding these sectors is the puzzle investors face now.

Netflix Engagement Declines, Competitive Pressure Mounts

Netflix reported disappointing second-quarter earnings. Revenue grew 13%, missing expectations. The streaming giant reported weak engagement data and subsequently announced it would reduce the frequency of its engagement reports, unsettling investors. The stock fell as much as 8% on Friday.

Netflix once boasted about its transparency; now, that claim seems somewhat ironic. In Q1 2025, Netflix stopped reporting quarterly subscriber numbers, telling investors to focus on engagement instead. Last week, the company decided to reduce its "What We Watched" engagement report from twice a year to once a year, starting in 2027.

The final semi-annual engagement report looked weak. Total hours viewed grew by only 2%, while the subscriber base was estimated to have grown by 10%, implying an 8% decline in daily engagement per subscriber.

Netflix has been facing increasing competition from short-form video providers, particularly YouTube. In response, it has added "Clips," a TikTok-style scrolling feature that surfaces short content from its own library, struck video podcast deals with Spotify and Barstool, and signed new licensing agreements with external publishers (BuzzFeed, Condé Nast) to bring new short-form video content to the platform.

Netflix has lost over $250 billion in market value over the past year, while fellow streaming giant Disney has lost nearly $50 billion. Both are well-managed companies with growing revenue and subscribers and rising prices—yet they are being penalized for it. This raises an important question: Is streaming just a bad business? Or have Netflix and Disney run out of creativity? Let us know 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 may be the best enterprise software operator of his generation.