OpenAI faces critical test as Google Gemini 3 triggers code red response

OpenAI, the prominent artificial intelligence research organisation, is navigating a pivotal moment as heightened competition from Google’s new Gemini 3 model has triggered an urgent internal directive. In a memo to staff, chief executive Sam Altman designated the period as a “code red,” underscoring the pressing need to enhance ChatGPT amid clear evidence that Google’s Gemini 3 is outperforming its rivals on several benchmarks.

Altman warned his team that the launch of Gemini 3 could result in “temporary economic headwinds” for OpenAI, indicating a challenging environment in which the company is compelled to reassess its priorities. He acknowledged that the perception in the market may be unfavourable in the immediate term, with OpenAI feeling the pressure due to Google’s considerable resources, including its highly profitable search operations and extensive financial reserves.

Despite ChatGPT’s achievement of engaging 800 million weekly users, the competitive landscape has intensified. Notably, Marc Benioff, chief executive of the software group Salesforce, publicly stated his preference for Gemini 3 after extensive usage, describing the advance in reasoning, speed, and multimedia capabilities as significant and asserting that it changed the status quo in the field of AI tools.

OpenAI, meanwhile, is deferring plans to introduce advertising within ChatGPT, choosing instead to focus on technical improvements and continual product development. Nick Turley, the head of ChatGPT, recently pledged to further increase the model’s capabilities, global reach, and user-friendliness to secure its leadership as the platform marks its third anniversary.

Facing the financial might of Google, Meta, and Amazon, OpenAI remains dependent on substantial external investment, notably from SoftBank and Microsoft. The company’s valuation has soared to $500 billion, up from $157 billion last October, yet OpenAI continues to operate at a loss. Altman projects annual revenues exceeding $20 billion this year, with ambitions to reach several hundred billion by the end of the decade. The organisation’s long-term strategy involves a planned $1.4 trillion investment in data centre capacity to support the training and operation of advanced AI systems over the next eight years.

Altman has cited the accelerating demand for AI applications in support of this aggressive infrastructure expansion, suggesting that the primary risk now facing OpenAI is insufficient computing power rather than overcapacity. Industry competition shows no sign of abating, as evidenced by Apple’s recent appointment of Amar Subramanya, formerly of Microsoft and Google, to lead its AI initiatives following a period of limited progress in deploying AI features across its product range.

The AI sector is entering a new phase marked by significant technological progress and rapidly shifting user loyalties. OpenAI’s response to this heightened competition will be closely watched by investors and industry observers alike as the company seeks to retain its influence in a market undergoing swift transformation.