MW As ChatGPT turns three, Deutsche Bank offers these solutions to Altman's 'Code Red'
By Jules Rimmer
Slowing subscription rates, fierce competition and rising investment costs obliged OpenAI CEO to issue a warning to staff
OpenAI CEO Sam Altman is under pressure to confront serious challenges to his company.
Earlier this week OpenAI CEO Sam Altman reportedly issued a 'Code Red' warning to staff, predicting the "vibes out there to be rough for a bit" and identifying a trifecta of issues threatening the company's future: namely, slowing subscriptions, intensifying competition and surging investment costs. Details of the internal memorandum were first reported in The Information.
OpenAI's forecast revenues versus cash flow. This is the problem facing Altman.
A research note published Wednesday by Deutsche Bank addresses each of these threats in turn and suggests possible solutions.
Altman's alert coincided with the third anniversary of the launch of OpenAI's flagship product, ChatGPT, and comes at a time when the viability of investment in AI is being questioned by markets. Although it's not yet publicly quoted, OpenAI has been valued in funding rounds at $500 billion. Many traders have begun to regard Japan's Softbank as a proxy for the company. And Softbank's shares have fallen around 40% since late October (JP:9984) precisely because of this association.
Deutsche Bank's note, titled "Happy birthday, ChatGPT," and authored by analysts Adrian Cox and Stefan Abruden, explores how OpenAI has long been regarded as "the poster child for AI" but has now reached a pivotal stage of its development.
Subscriptions are clearly key to the OpenAI business model and subscriptions are slowing. Deutsche doesn't have the data for the U.S. but European figures are available and indicate their value has risen 18% in 2025 but between June and September, for instance, they grew by just 0.5%. Proprietary data tracking by dbDataInsights indicate a 1.1% monthly rate in November.
In the U.S. reports, again from the Information website suggest 5% of OpenAI's 800 million weekly users pay for subscriptions and Altman expects that figure to grow to 8.5% of 2.6 billion users by 2030. If subscriptions are reaching a ceiling, Cox and Abruden recommend that OpenAI drives adoption through API (application programming interface that allows developers to integrate systems), expanding the user base through free access, launching new products and features, signing up new partners and providing alternative content.
Competition from emerging substitutes is another problem causing major concern for OpenAI investors. The Deutsche note cites examples from Google's $(GOOGL)$ Gemini 3 to Anthropic's Clause Sonnet 4.5 that are able to outstrip OpenAI on some metrics while Amazon, Perplexity and international rivals like France's Mistral and China's DeepSeek are also garnering attention.
Growth in the monthly users of Google's Gemini app was five times higher than ChatGPT in 2025
Cox and Abruden emphasize that "retail consumers are inclined to pick products that have the least possible cost and friction" and OpenAI needs to distinguish its service as one worth paying for and perhaps enable it for users to pick open-source models they can develop or tweak for free.
Lastly, Deutsche's note addresses the issue that has preoccupied markets most of all in recent months: costs. This year alone, the Wall Street Journal estimates that OpenAI's costs are $22 billion, compared with revenues of just $13 billion.
OpenAI is not expected to make a profit until 2030 and has committed to spending $1.4 trillion on data centers in the next eight years. OpenAI, Deutsche observes, must "rein in its spending or prove it can somehow afford it." An initial public offering as soon as 2027 may improve transparency and make funding easier, they suggest.
-Jules Rimmer
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December 03, 2025 06:02 ET (11:02 GMT)
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