By now you’ve probably heard whispers about OpenAI’s Code Red internal memo. Maybe you saw the headlines but didn’t dig into the details. Here’s what you need to know: OpenAI just went into full panic mode, and it says a lot about where the AI industry is headed.
Let me break down why OpenAI issued their highest internal urgency level, what it means for the competition, and what we can expect in the coming weeks and months ahead.
What Actually Just Happened?
In a memo to staff this week, Sam Altman announced a “Code Red.” This is apparently their highest internal urgency level.
The company wants to shift their resources around to focus on improving ChatGPT as the competition intensifies. To do this, they’re deprioritizing almost everything that’s not ChatGPT. Their agent features, their Pulse feature, baking ads into ChatGPT – these are all seemingly going on the backburner in favor of just making ChatGPT better.
The New Priorities
Instead the focus now shifts to:
- Better speed and reliability
- Handling a wider variety of questions
- Improving personalization and usability
- Enhancing associated tech like image generation and editing
- Reducing “over-refusals” – basically any time ChatGPT says something like “I can’t answer that” for harmless requests
In a nutshell, Code Red is OpenAI going into triage mode. They’re putting all their energy into the core product that everyone knows them for.
But how did we get here? Why is the most recognizable name in AI freaking out? They’re basically the “Band-Aid” or “Kleenex” of AI. People use the terms AI and ChatGPT interchangeably.
How We Got Here: A Brief History Lesson
A little over three years ago, before the launch of ChatGPT, Google and DeepMind were broadly considered the global AI standard. They invented the transformer, had the most cutting-edge models, and had massive compute at their disposal. Google was the leader in AI.
When ChatGPT launched in late November 2022, it rewrote the rules.
Overnight, generative AI stopped being “research-lab only” and became a mainstream utility. People could write emails, code, essays, generate ideas, even ask complicated questions – no PhD required. This dramatically widened the user base, the expectations, and the pressure on companies like Google.
Google’s Response
Google responded by reportedly issuing their own “code red.” They scrambled to catch up and integrate AI across Search, products, and infrastructure. Larry and Sergey, the original founders of Google, even came back to put their brainpower into catching back up with OpenAI.
The narrative at the time was that Google had everything to be the AI powerhouse. They invented the technology that all LLMs use today. They had the smartest minds in AI working for them. They had all the infrastructure. And yet, somehow they managed to fumble that lead.
Slowly but surely, Google started chipping away at improving their AI offerings. They also seemingly stopped playing as scared, releasing models to the public that clearly weren’t ready yet.
Cracks Start to Show at OpenAI
As Google was starting to gain a little momentum, cracks started to show at OpenAI. In 2023, the non-profit board of OpenAI actually pushed CEO Sam Altman out, creating chaos, investor uncertainty, and most importantly, planted a ton of seeds in people’s minds about Sam’s character and his ability to lead a company with such insane implications on the future of the world.
Shortly after the Sam Altman incident, OpenAI started having “brain drain” problems. Some of their most talented and well-known scientists and engineers were bailing to create their own companies or to join other labs.
- Andrej Karpathy – a founding member who worked on computer vision and generative modeling – left in early 2024 to focus on personal projects and started his own thing
- Ilya Sutskever – a co-founder and former Chief Scientist that was deeply involved in OpenAI’s foundational work – quit in mid-2024 to build his own lab called Safe Superintelligence
- Mira Murati – the company’s former CTO – left in late 2024 to build a lab called Thinking Machines
And those are just the more well-known names. Beyond them there’s a pretty long list of senior researchers, execs, and product leads who have exited or moved to rival labs and startups.
Google’s Comeback: Gemini 3 Changes Everything
Fast forward to November 2025: Google dropped Gemini 3, one of the most anticipated models of the year. And it blew people’s minds. Not only did people see a huge uplevel in capabilities of an AI model but it also outperformed OpenAI’s models on pretty much every industry benchmark.
Marc Benioff, the CEO of Salesforce, said this: “I’ve used ChatGPT every day for 3 years. Just spent 2 hours on Gemini 3. I’m not going back. The leap is insane – reasoning, speed, images, video… everything is sharper and faster. It feels like the world just changed, again.”
And Gemini use is growing fast too. In October, Google claimed that Gemini had 650 million monthly active users. That’s up from 450 million monthly active users in July. So it grew by 200 million monthly users in just 3 months.
Google had once again become the king of AI. At least from a model capabilities standpoint.
Google’s Strategic Advantages
And not only that – but Google had positioned itself to actually stay on top too. OpenAI has great foundational models but they’re still reliant on compute and infrastructure from other companies. Google, on the other hand, has state of the art models as well but they also have custom silicon in their TPU chips, their own cloud hosting, and seamless integration across billions of users in Search, Chrome, Android, Gmail, Drive and more.
Google also has all of the revenue it generates from its search and other businesses to help subsidize AI use. OpenAI, on the other hand, is losing hundreds of millions of dollars per month and constantly needs to raise more capital to keep up with costs.
To add to OpenAI’s troubles, rivals like Anthropic have been gaining traction as well – especially among enterprise customers and coders. Almost everyone who’s serious about coding knows that Anthropic’s models are still the superior option over OpenAI’s and even Google’s models.
In short: OpenAI, the once-clear leader, is no longer uncontested. The benchmark lead is eroding and the field is fragmenting.
Why the Code Red Was Actually Issued
Let’s put this all together:
- Benchmark losses – OpenAI is no longer automatically the best. Gemini 3 and Claude Opus 4.5 beat them in most benchmarks. Even Grok from xAI is beating OpenAI in some key benchmarks now
- Rising competition from well-funded rivals like Google, Anthropic, and these new labs that are all popping up from ex-OpenAI founders and team members
- Talent attrition – brain drain is making it harder to innovate and maintain the lead
- Internal strategic uncertainty – too many initiatives, too many possible directions, and likely diluted focus
They’re building browsers, news aggregators, agents, image generators, video generators, new voice modes, health agents, coding apps, and even working on physical hardware. When in reality, most people just want ChatGPT to get smarter and respond more how they want it to respond. Most of the world sees the rest as just noise.
So rallying the troops with a Code Red makes sense: prioritize what still defines them (ChatGPT), double down on that core competency, delay distractions, and try to fight back from a position of strength.
It may also be a statement to investors, stakeholders, and the broader AI ecosystem: “Yes – we see the danger. We’re doubling down.”
And let’s be honest, Sam and the OpenAI team have a tendency to hype things up a bit only to overpromise and underdeliver. Many out there believe that this “Code Red” is just another marketing play by OpenAI to spread rumors and excitement about their next model.
What’s Coming Next?
According to reports, OpenAI plans to roll out a new reasoning model “next week” – presumably to get back into being the main story in the AI narrative that’s playing out.
They claim the model already scores ahead of Gemini 3 on their internal evaluations.
Now, I’m not clear if this new model is going to be publicly released, if it’s going to be something their internal team gets access to next week, or if it’s all just some unfounded rumor. They haven’t made a public announcement about this next model yet. But I do think most OpenAI users are on board with the idea of shifting focus back to just making better and better models and continuing to improve the user experience for everyone. That’s what most of us really care about.
My Take on All of This
OpenAI has gotten a little too caught up lately in things like browsers, automation competitors, new voices, and things that most people don’t really care that much about. They’ve strayed a bit too far from being a research lab that focuses on making better and better models.
In fact, I personally think OpenAI models have regressed to some degree. This may just be me but I’ve noticed ChatGPT becoming less and less accurate lately. Again, I could be going crazy, but it feels like it hallucinates so much more for me lately than previous models did.
I feel like OpenAI decided they wanted to build a killer product that would get a lot of users and keep people on their platform when they should have been focused on making more and more capable models. I think Sam is finally seeing that for himself and course correcting.
I don’t know if we’re going to get a new model next week or not but I sure have been finding myself frustrated with it lately and thinking it’s stupider than it used to be. So hopefully whatever’s coming fixes that.
The bottom line? OpenAI just realized they’re not the only game in town anymore. The AI race is heating up, and they’re finally taking the competition seriously.