History Repeats as OpenAI Hits the Panic Button
Three years ago, Alphabet (GOOGL) declared a "code red" emergency...
In November 2022, OpenAI released ChatGPT. It was a revolutionary step in AI. And its natural language prompting made Google's search function seem obsolete.
The threat was so serious, Google cofounder Sergey Brin came out of retirement to get the company back on track.
But Alphabet has recovered by embracing AI at every level of its platform. And now, it's OpenAI's turn to hit the panic button...
According to the Wall Street Journal, OpenAI CEO Sam Altman announced a "code red" on December 1. He urged employees to delay other projects and focus on upgrading ChatGPT.
Alphabet is pulling ahead in the AI arms race. But as I'll explain today, it's still too early to write off OpenAI...
Last month, Alphabet released its Gemini 3 chatbot. It outperforms ChatGPT on various thinking tasks. And its release put OpenAI firmly on the back foot.
A key reason for Gemini 3's lead is that it uses tensor processing units ("TPUs"). These chips differ from Nvidia's (NVDA) graphics processing units ("GPUs"), which have powered the AI boom so far.
TPUs are optimized for AI training. They're more energy efficient. And they deliver extremely fast AI calculations.
This shift helped Alphabet reduce its reliance on Nvidia's hardware. And the market has noticed...
Alphabet's stock has surged as traders bet it will take the crown... Meanwhile, Nvidia's stock has stalled.
Investors see Gemini 3 as the start of the next wave of AI chatbots. And you might think it's a bad sign for AI companies that use Nvidia chips, like OpenAI.
But not so fast...
Nvidia Prepares Its Next Comeback
Gemini 3 proves that better hardware leads to smarter AI chatbots. But OpenAI can benefit from the same trend.
Today, ChatGPT largely runs on Nvidia's H100 chips. These chips powered the first few years of the AI build-out.
But Nvidia has a new chip standard on the way – the B300, or "Blackwell" GPU.
Blackwell chips deliver 11 times better inference performance than the H100. They're Nvidia's best GPU ever... And they've only been available since September.
Given the leaps we've seen from TPUs, we can bet that models running on the new Blackwell chips will also see massive jumps in speed, accuracy, and reasoning.
OpenAI's "code red" isn't the beginning of the end. Instead, it looks more similar to Alphabet's panic in 2022. OpenAI could still catch up... And Nvidia could still climb to new all-time highs as the new hardware cycle ramps up.
The AI boom is only three years old. We're still scratching the surface of what consumer AI might look like... and how AI tech will impact our everyday lives.
So, yes, Gemini 3 may offer the best AI integration today. And yes, it's possible that this chatbot will help Alphabet win the AI race.
But it's equally possible that the Blackwell chip will help OpenAI reclaim the crown. It's even possible that Gemini and ChatGPT will both stick around as market leaders, like Coca-Cola and Pepsi.
In short, it's still too early to pick one winner in the AI boom. And as the market tries to decide who might win, both Nvidia and Alphabet can climb from here.
Good investing,
Sean Michael Cummings
Further Reading
The world is consuming AI as it becomes faster and more capable. That simple dynamic is about to trigger a huge investment cycle in the infrastructure needed to keep it running.
A new generation of small, specialized devices is emerging – and they all rely on a new class of ultra-efficient chips. And this shift could spark the next major investment cycle in AI hardware.
HIGHS AND LOWS
NEW HIGHS OF NOTE LAST WEEK
Citigroup (C)... financial giant
Goldman Sachs (GS)... financial giant
Royal Bank of Canada (RY)... financial services
Toronto-Dominion Bank (TD)... financial services
Wells Fargo (WFC)... financial services
Analog Devices (ADI)... semiconductors
Applied Materials (AMAT)... semiconductors
Lumentum (LITE)... telecom equipment
Estée Lauder (EL)... cosmetics
Ulta Beauty (ULTA)... cosmetics
Walmart (WMT)... discount retail king
Dollar General (DG)... discount retailer
Caterpillar (CAT)... construction equipment
General Motors (GM)... automaker
NEW LOWS OF NOTE LAST WEEK
SentinelOne (S)... cybersecurity
CorVel (CRVL)... risk-management solutions
Cinemark (CNK)... movie theaters
McCormick (MKC)... spices
Gaming and Leisure Properties (GLPI)... gaming REIT
American Homes 4 Rent (AMH)... residential REIT
Alexander & Baldwin (ALEX)... commercial real estate
Invitation Homes (INVH)... rental-home REIT
MGE Energy (MGEE)... utilities