OpenAI Throws Down the Gauntlet with GPT-5 & Open-Source Models as AI Competition Shifts into Overdrive
Plus, the Trump threat to the innovation economy & rule of law is a five-alarm emergency
The Week in Short
OpenAI debuted GPT-5 to mixed reviews, but the ChatGPT-maker still holds all the cards in the consumer market. Trump’s disregard of the law & science can only hurt innovation and demands a response.
Behind the paywall: Sequoia wrote checks into 3 of this week’s buzziest funding rounds. Plus, Firefly Aerospace’s IPO pops as tech shares gyrate on earnings & tariffs. China’s DJI struggles in Washington, while Meta lures Pimco & Blue Owl for massive data center financing.
The Main Item
OpenAI’s New Model Is an Improvement. Coding & Open Source Strategies May Matter Even More.
We may not be feeling the AGI, but OpenAI is still flexing in the race for superintelligence.
After weeks of hints and hype-building coverage, OpenAI’s GPT-5 debuted to the public yesterday. Its biggest improvement appears to be the UX for ChatGPT customers, as reviewers have gushed. Instead of selecting which model you want when you enter the app, it will route your task to the appropriate one based on key phrases in your request. If you remember all the talk of model routing startups two years ago, this process will be familiar.
The AI leader also unveiled its first open-weight models — a big departure for the company, and one that had the look of a power move against Meta in particular, as well as other rivals. Mark Zuckerberg is walking back Meta’s commitment to open source as he builds up the superintelligence team; now OpenAI is offering free models that can run locally on consumer devices and be fine-tuned by developers.
The GPT-5 announcement got some positive notices. Tyler Cowen remarked that GPT-5 just “feels fun” to use, calling it the “best learning tool I have.” The model has improved a step in coding, the hottest category of moment, particularly on the front end where it’s working to attract design-conscious vibe coders. As far as writing prose goes, it has “much better taste,” said Nick Turley, the head of the ChatGPT team.
However, AGI it certainly isn’t. GPT-5’s gains in capability are tangible, several testers told Reuters, though not as big a jump as GPT-4 was from GPT-3.
Among the releases are a new GPT-5 mini model for free users, and GPT-5 Pro and GPT-5 Thinking for Pro paying users. Ever-attentive to any marketing edge, OpenAI also managed to eclipse the release of Genie 3, Google’s latest interactive world-building model for making simulated environments.
For all its improvements, GPT-5 still gets things wrong often enough to make the AGI moment feel far away. Its hallucination rate is 9.6% when it’s given access to the web to source answers. That drops to 4.5% with reasoning activated.
In a painful reminder of how tough the issue has been to crack, the company’s own live demonstration, featuring an explanation of the “Bernoulli Effect,” contained factual errors.
The lack of massive amounts of fresh training data is part of the issue, Sam Altman acknowledged in a press briefing Wednesday, though he said GPT-5 was still a “significant step” towards AGI.
Regardless, OpenAI is showing there’s plenty of business to be done with the current state of the tech. ChatGPT now has more than 700 million weekly active users, up from 500 million in March and 300 million at the end of last year, the company said Thursday. That figure includes Plus, Pro, and Enterprise users, the latter of which total around 5 million. As for all paid users, the company won’t share the latest totals, though they told The Information in early April that it had hit 20 million.
The current figure would be of great interest to many even outside the industry amid all the talk of an AI capex bubble.
The Fight for Coding Customers
An especially important benchmark for GPT-5 will be its coding performance. Anthropic’s Claude Code is considered the clear leader at the moment, and developers say it will take a few days or weeks to determine if GPT-5 has equaled it or pulled ahead.
One source at a coding-app firm said GPT-5 looked to be a little better than Claude, but not much. At a minimum though it could put price pressure on Anthropic, which is currently trying to figure out how much of the coding business it can own directly as it competes with its biggest customer, Cursor. It has cut off others, including OpenAI, from access to Claude.
OpenAI is wrestling with a similar question of whether to pursue coding apps as enterprise customers, or try to kill them. It sought to buy fast-growing coding app developer Windsurf only to see the deal fall apart and leave an opening for Google to swoop in.
The open-model play is similarly a strategic chess game. Open-weight models cost money to run due to compute demands, but they can potentially do serious damage to competitors by commoditizing their work, while drawing both consumers and developers into the OpenAI world.
With OpenAI enjoying a seemingly limitless ability to raise money and a valuation reported to be hitting $500 billion, why not?
Newcomer Podcast
AI Is Saving the Economy. For Now.
GPT-5 has landed! Is it the leap forward OpenAI promised or just an incremental upgrade? Eric and Tom discuss this, how AI capex might be propping up the entire economy, and what Apple’s golden gifts to Trump say about big tech’s political bets.
Dangerous Politics
Trump’s Attacks on What Made America Great Demand a Response From Tech Leaders
Another week, another set of destructive and frightening orders from our commander in chief — and another stretch of silence from tech and business leaders who seem content with the abandonment of constitutional government as long as stocks keep rising.
It’s taken just a few months for our “Dear Leader” to intimidate the world’s most powerful CEOs and investors into biting their tongues, even on the most critical matters.
This week’s highlight, so far at least, is the decision by HHS Secretary Robert F. Kennedy Jr. to eliminate the government’s $500 million program for mRNA vaccines, which were a monumental breakthrough that led to the Covid vaccine in record time. While public health researchers expressed their horror, there was silence from the bio-tech and health-tech industries and their financial backers, even though they would seem to have no future in an anti-science America where a mountebank runs national health policy.
There are plenty of other examples of Trump actions that directly threaten vibrant sectors of the startup economy. Hardly anyone outside the oil industry thinks America’s abandonment of clean energy and the fight against global warming is a good idea. Yet where are all the Silicon Valley enviro-tech entrepreneurs and investors in pushing back on this ridiculous and enormously damaging policy shift, which is driven by nothing more than Trump’s personal prejudices?
Maybe health and energy lobbyists are working overtime to reverse these dangerous moves, for self-preservation if nothing else, but it’s not obvious that’s the case.
Then there are the many ways in which Trump initiatives are designed to undermine democracy and the free-market economy, and accrue power for himself personally at the expense of the Constitution and common decency. The plain illegality of many of his actions and his disregard for individual liberty and the rights of private companies deserve long and loud condemnation from business leaders and investors, but we haven’t seen any such thing.
It very obviously violates the First Amendment for the president to condition a merger approval on a TV network agreeing to be less critical of him, but that is exactly what happened with the Paramount sale to Skydance. Instead of fighting a lawsuit she certainly would have won, Paramount’s controlling nepo-baby, Sherry Lansing — with the support of acquiring nepo-baby David Ellison — agreed to pay a $16 million bribe, tamp down 60 Minutes, and fire Steven Colbert.
Is that what MAGA means by restoring free speech and meritocracy?
Examples of elite acquiescence to Trump’s attacks on the rule of law and the free market are everywhere. A number of the nation’s top law firms, better equipped than anyone to fight, instead agreed to settle bogus allegations of political bias and give hundreds of millions in free legal services to Trump causes. At least they are suffering for their cowardice.
Trump’s firing of Bureau of Labor Statistics boss Erika McEntarfer last week because he didn’t like the numbers was practically a parody of what goes on in countries we could once mock as tin-pot dictatorships. It’s not funny though: U.S. economic data underpins the entire global economic system, not to mention things like social security payments, and everyone agrees that its integrity is critical.
Yet where were the howls of protest, the open letters from business executives and investors, the CNBC interviews with CEOs denouncing the danger? All we saw was criticism from pundits and economists.
The President is eager to intervene in the operations of private businesses: witness this week’s spectacle of Trump announcing Apple’s alleged new commitment to U.S. manufacturing, and demanding that Intel fire its CEO. We’d thought Republicans were opposed to the government telling companies what to do, but the outraged reactions have been conspicuously missing. The same applies with the attacks on DEI programs, which companies have every right to pursue.
Trump is in daily violation of the Foreign Emoluments Clause of the Constitution, which bars gifts to the President from other governments, but that barely merits a mention anymore amid all the law-breaking; the Administration now routinely ignores court orders. The Congressional legislation mandating the sale of TikTok might as well not exist.
Then there are the tariffs, where Trump is again ignoring the plain words of the Constitution, relying on a thin “emergency” exception to bypass the requirement that tariffs be approved by Congress. Worse, the way the tariffs are being implemented makes clear that there is no real economic policy rationale at all, except in the broadest sense. Tariffs are a way for Trump to aggregate power by forcing foreign leaders and CEOs alike to come begging for his indulgence, even though it’s implausible that, say, using tariffs to punish Brazil for prosecuting its insurrectionist former president would pass legal muster.
America is no longer a rule-of-law country, which we’d always taken for granted as a foundational element of its economic success and its status as the leader of the free world. Where are its defenders in the tech community?
The list goes on. Silicon Valley runs on immigrants, we are constantly reminded, from the CEO suites on down. Yet the same companies that were eager to defend immigrant employees back in 2017 are now silent as masked federal agents kidnap green-card holders off the streets for shipment to overseas prison camps, while border patrol agents detain people for the sin of appearing to be against Trump.
The President is quite explicit that he believes laws don’t apply to him, and the Supreme Court has mostly agreed. So now we have the disgraceful spectacle of his sons running a massive crypto grift while Republicans in Congress pass laws that explicitly allow the President and his family to enrich themselves in any way they can dream up. Trump’s take is already in the billions.
The Smithsonian exhibit on presidential history excised the two impeachments of Trump, though it later said they would be restored. National parks are being forced to alter displays that might contradict MAGA ideology. The Library of Congress website on the Constitution managed to eliminate key sections, including the emoluments clauses and the habeas corpus protections against arbitrary detainment. Supposedly it was a coding error, but forgive us for not being so sure.
It’s easy, and accurate, to say that Trump is turning the U.S. into a “banana republic,” the derisive term for Latin American countries that were all but controlled by the United Fruit Co. and other multinational agribusinesses more than a century ago, with backing from the U.S. government.
The moniker is fitting in more ways than one. Trump wants to turn the clock back several hundred years to the mercantilist era, where powerful monarchies sought to dominate weaker foreign countries and trade flows for their own benefit, by military force where necessary. There is a reason that approach was left in the dustbin of history. It may take a while, but America will be in that dustbin too if business and technology leaders won’t stand up to Trump.