OpenAI is at a classic strategy crossroads involving its ‘moat’—which Warren Buffett believes can make or break a business

Finance·Artificial IntelligenceOpenAI is at a classic strategy crossroads involving its ‘moat’—which Warren Buffett believes can make or break a By Geoff ColvinBy Geoff ColvinSenior Editor-at-LargeGeoff ColvinSenior Editor-at-LargeGeoff Colvin is a senior editor-at-large at Fortune, covering leadership, globalization, wealth creation, the info revolution, and related issues.SEE FULL BIO Sam Altman's ChatGPT has a massive lead—and faces a strategic challenge

It’s an epochal moment as history’s general-purpose nology, AI, forms itself into an industry

Much depends on these early days, especially the fate of the industry’s leader by a mile, Open AI

In terms of the last general-purpose nology, the internet, will it become a colossus Google or be forgotten AltaVista? No one can know, but here’s how to think it

OpenAI’s domination of the industry is striking

As the creator of ChatGPT, it recently attracted 78% of daily unique visitors to core model websites, with six competitors splitting up the rest, according to a recent 40-page report from J.P

The great question now is whether OpenAI can possibly maintain its wide lead (history would say no) or at least continue as the industry leader

The answer depends heavily on OpenAI’s moat, a Warren Buffett term for any factor that tects the company and cannot be easily breached–think of Coca-Cola’s brand or BNSF Railroad’s economies of scale, to mention two of Buffett’s successful investments

On that count the J.P

Morgan analysts are not optimistic

Specifically, they acknowledge that while OpenAI has led the industry in innovating its models, that strategy is “an increasingly fragile moat.” Example: The company’s most recent model, GPT-5, included multiple advances yet underwhelmed many users

As competitors inevitably catch up, the analysts conclude, “Model commoditization is an increasingly ly outcome.” With innovations suffering short s, OpenAI must now become “a more duct-focused, diversified organization that can operate at scale while retaining its position” at the top of the industry–skills the company has yet to demonstrate

Bottom line, OpenAI can maintain its leading rank in the industry, but it won’t be easy, and betting on it could be risky

Yet a different view suggests OpenAI is much closer to creating a sustainable moat

It comes from Robert Siegel, a management lecturer at Stanford’s Graduate School of who is also a venture capitalist and former executive at various companies, many in nology

He argues that OpenAI is already well along the road to achieving a valuable attribute, stickiness: The longer customers use something, the less ly they are to switch to a competitor

In OpenAI’s case, “people will only move to Perplexity or Gemini or other solutions if they get a better result,” he says

Yet that becomes unly because AI learns; the more you use a particular AI engine, the more it learns you and what you want. “If you keep putting questions into ChatGPT, which learns your behaviors better, and you it, there’s no reason to leave as long as it’s competitive.” Now combine that logic with OpenAI’s behavior. “It seems their strategy is to be ubiquitous,” Siegel says, putting ChatGPT in front of as many people as possible so the software can start learning them before any competitor can get there first

Thus, Siegel says, OpenAI can “continue to run hard and use capital as a moat so they can do all the things they need to do to be everywhere.” But Siegel, the J.P

Morgan analysts, and everyone else knows plenty can always go wrong

An obvious threat to OpenAI and most of its competitors is an open-source model such as China’s DeepSeek, which appears to perform well at significantly lower costs

The venture capital that has poured into OpenAI could dry up as hundreds of other AI startups compete for financing

Morgan and Siegel agree that OpenAI’s complex unconventional governance structure must be reformed; though a recently posed structure has not been officially disclosed, it is reportedly topped by a nonfit, which might worry fit-seeking investors

As for moats, OpenAI is obviously in the best position to build or strengthen one

But looking into the era of AI, the whole concept of the corporate moat may become meaningless

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