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

Original Authors: Scott Galloway & Ed Elson

Original Translation: TechFlow

Introduction: Apple lawsuit, Oracle downgrade, price war erupts — OpenAI is having its worst week ever. Worse still, if these risks all materialize, its 2030 revenue forecast could plummet by 70%, and its cash flow losses could reach $165 billion. Could this AI giant, valued at hundreds of billions, become the biggest tech bubble in history?

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

For OpenAI, this has been another terrible week. The company was exposed for 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 could come in 95% lower than its own projections.

That's not all. Apple sued OpenAI last week, alleging that its consumer hardware plans are the product of stolen intellectual property. S&P Global Ratings also downgraded Oracle's debt to BBB-, just one notch above junk status, citing OpenAI as a "key credit risk." Additionally, DeepSeek is reportedly preparing for an IPO, potentially filing as early as this year. A successful listing by 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 contractual obligations worth hundreds of billions of dollars with computing suppliers and chip companies.

First, Apple's lawsuit could bring OpenAI's entire hardware business to a halt. Apple alleges that OpenAI poached over 400 Apple employees, extracted confidential information from them, and then induced Apple's suppliers to perform proprietary work for OpenAI without permission. Apple is seeking monetary damages and an order for OpenAI to return or destroy all misappropriated property.

Second, the AI price war is already underway, 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). In the first half of 2025, that share was only 4.5%.

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

In a worst-case scenario, if Apple's lawsuit shuts down OpenAI's hardware business, ChatGPT's ad revenue languishes as predicted by EMarketer, and the price war forces OpenAI to cut model pricing by 80%, then OpenAI's revenue could fall by 40% in 2026 and 70% in 2030.

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

This would also impact when OpenAI becomes cash flow positive. According to internal forecasts, OpenAI was expected to turn cash flow positive in 2030. But in this downside scenario, it would instead lose $165 billion that year.

OpenAI CEO Sam Altman tried 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: offering 80% of a product's value at half the price. That's exactly what DeepSeek and other Chinese open-weight models are now trying to do.

The US has placed a huge bet on AI, and 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 it really? The deeper you look, the harder it is to argue that stocks, bonds, and even alternative assets are anything but a massive bet on AI right now.

This pattern is most evident in the stock market. AI-related stocks account for over 50% of the S&P 500 index by weight, and 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 performers 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 surging electricity demand driven by AI. US power demand jumped to an all-time high last year, with data centers accounting for about 50% of the demand growth.

Industrial stocks have surged 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 (26x) is higher than that of tech companies (24x).

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

Even 52% of the Russell 2000 small-cap index's return in the first half of this year came from AI-related companies.

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

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

Torsten Slok, Apollo's Chief Economist, succinctly summarized the implication of this dependence: "This AI thing better work."

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 talking heads on CNBC own stocks, so they'll always find reasons why others should buy more. But don't be fooled: the market hasn't broadened; it has just found new ways to buy Nvidia.

Everything is becoming an AI stock. This isn't necessarily bearish, but investors are fooling themselves by calling it "broadening," as if it means diversification away from AI. It doesn't. Buying "AI-adjacent stocks" and calling it broadening is like ordering a Double-Double burger at In-N-Out with a Diet Coke. To be clear: you still bought a cheeseburger.

Among the big tech companies, which is least dependent on AI? Apple. Apple's stock is up 60% over the past year, just surpassing Nvidia to become the world's most valuable company again. Amazon, still AI-related but more diversified than other hyperscalers, is up 11% over the past year. Microsoft, at the core of 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 irrational it can run. But you should understand the market's real exposure to one sector.

I'm a big 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, meaning you have to start doing some homework.

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

I would point to one: healthcare. It was one of my picks at the start of the year, and I'm sticking with it. AI hasn't touched it yet — meaning real returns might still lie ahead. But finding these sectors is the challenge investors face now.

Netflix Engagement Declines, Competitive Pressure Intensifies

Netflix reported disappointing second-quarter earnings. Revenue grew 13%, missing expectations, and the streaming giant unsettled investors by reporting weak engagement data, followed by an announcement that it would reduce the frequency of its engagement reports. The stock fell as much as 8% on Friday.

Netflix once boasted about its transparency; now, that claim seems somewhat ironic. In the first quarter of 2025, Netflix stopped reporting quarterly subscriber numbers, telling investors to focus on engagement. Last week, the company decided to reduce its "What We Watched" engagement report from semi-annual to annual starting in 2027.

The latest semi-annual engagement report looked weak. Total viewing hours grew only 2%, while the subscriber base is estimated to have grown 10%, meaning daily engagement per subscriber fell 8%.

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 entered new licensing agreements with external publishers (BuzzFeed, Condé Nast) to bring new short-form video content onto 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 in the comments.

In the next six months, OpenAI will acquire the enterprise AI company Sierra and appoint Bret Taylor as CEO. Sam Altman will be elevated to Chairman. Altman is an innovator, not an operator, and Bret Taylor might be the best enterprise software operator of his generation.