Meanwhile, Anthropic’s revenue growth recently surpassed OpenAI’s, as did its valuation, which is now nearing $1 trillion, powered by the success of coding tool Claude Code. It is accelerating plans for a fall initial public offering, kicking off meetings with potential investors in which it has emphasized its lead over the ChatGPT maker, according to people familiar with those talks.

“We did not have our best last 12 months ever, which is mostly my fault, but we are about to have our best 12 months to date,” Altman posted on X earlier this month. “The team is doing amazing work and I think you’ll be very happy with what they’ve got cooking for you.”

OpenAI’s challenges in trying to regain its crown are rooted in an earlier misreading by company leaders of where the AI market was headed. Its predicament speaks to the intense competition that defines the race for AI supremacy. 

Altman initially staked the growth of the business on ChatGPT, betting that more people would subscribe to the chatbot as AI became a bigger part of their lives. Instead, the overnight success of Claude Code made clear that the bigger prize came from selling tools to brainy software developers, and the deep-pocketed companies that employed them.

While OpenAI pursued a host of flashy projects from a video generator to consumer devices and chips, its smaller, more focused rival filled in the gap, developing a hit coding tool that helped it seize the lead.

As it chases its top competitor, OpenAI has released a series of new models focused on coding and other professional work, and put its president, Greg Brockman, in charge of revamping its product lineup. It also struck a deal with Amazon to sell AI tools to the cloud giant’s customers and hired former Slack CEO Denise Dresser to become its first chief revenue officer.

“I think that now we’re at a point where it feels like we have this really humming machine,” Brockman said at a July media lunch. 

Altman is also in Washington this week meeting with Trump administration officials and lawmakers to preview a new model as the government debates how to further regulate the industry.

Executives are still trying to figure out the most effective pricing plans for its Codex enterprise product, including price cuts that could help it gain market share, though that risks eroding closely watched profit margins ahead of an IPO.

OpenAI might now wait until next year to go public, people with knowledge of the plans said, after earlier hoping to beat Anthropic. When it filed to go public a week after Anthropic, it hedged on timing, saying “it may be a while” because there are “things we want to do that are likely easier as a private company.”

Codex challenges

OpenAI was initially well positioned for the enterprise business it is now scrambling to land.

It launched a series of so-called reasoning models in the fall of 2024 that were able to work through problems step-by-step before answering, a capability that turned out to be well-suited for writing code. But researchers trained those models to ace coding problems from high-school competitions, not to handle the messier, more open-ended work of building software.

Anthropic took the opposite approach with its own reasoning model, called Sonnet 3.7, a few months later. In a February 2025 blog post, the company said it was focused on “real-world tasks” that reflected how businesses actually used AI.

OpenAI gave employees early access to a new version of Codex early last year, expecting it to be an instant hit, particularly among tech-savvy software engineers who had long been tracking the technology’s progress. Instead, usage was lower than anticipated, frustrating executives who repeatedly flagged the issue internally. 

At first, the challenges with Codex appeared to be nothing more than a blip. ChatGPT’s weekly active users continued to climb, as did the company’s valuation. Last August, OpenAI brought in Simo, the former Instacart CEO, to help prepare it for a blockbuster IPO. 

Instead, Codex’s troubles turned out to be an early warning sign of challenges to come. After OpenAI announced the tool publicly in May, it underperformed expectations. Software engineers flocked to Claude Code instead.

Anthropic executives at an event in San Francisco in May. Jason Henry for WSJ

Many developers felt that Codex was too slow and clunky to use, leading OpenAI to change the product to more closely mimic Anthropic’s. The company also created a new team, called coding ninja, tasked with making sure new models were designed in a way that customers found useful. 

But executives were also distracted by other, more pressing issues, such as fending off a talent raid launched by Meta CEO Mark Zuckerberg and fixing a worsening relationship with Microsoft, its largest investor. They spent precious computing resources on other projects that flopped, including the video-generator app Sora. 

By the time the company turned its attention back to Codex, it was already behind. 

Executives released a new model, GPT-5.2, in December, focused on coding and other professional tasks, overruling some employees who asked to push back its release so the company could have more time to make it better.

When the company heard Anthropic was in talks to partner with Cerebras, a startup that had built a specialized chip to process coding tasks at a rapid clip, it rushed to sign a deal of its own in an effort to box out its rival, people familiar with the matter said.

It wasn’t enough to stem the bleeding. 

While Altman visited St. Barts in the Caribbean during the December holiday break, coders in San Francisco spent hours on “Claude-benders,” marveling at capabilities enabled by a new Anthropic model called Opus 4.5. Anthropic then went on a multimonth growth streak that surprised even its own leaders.

Meanwhile, ChatGPT’s growth suddenly tapered off after Google’s own consumer chatbot began to surge in popularity. The company missed an internal goal of hitting one billion weekly active users by the end of the year, although it hit the figure recently.

Before long, Anthropic’s growth rate surged past OpenAI’s, as did its valuation—and OpenAI found itself waging two separate battles as its lead in the AI race came under siege. 

When executives pitched senior leaders at Blackstone on a partnership to create a new company to sell AI tools to the private-equity giant’s portfolio companies, they didn’t bite. Blackstone went with Anthropic for the project instead. OpenAI later struck a separate deal with other private-equity players.

By March, some OpenAI employees had grown frustrated, peppering a top executive with questions about the company’s future.

“It feels like Anthropic, a much smaller company by headcount and market cap, is consistently setting the frame technically and culturally, and we are reacting. Why does this keep happening?” one question read.

Another framed the problem in even starker terms: “What impact would Anthropic’s revenue surpassing ours have on our IPO plans?”

Simo said at the time that the company had lost its way chasing “side quests” and had fallen behind its rival in both research and product. Anthropic’s revenue “is a proxy for how well they are accomplishing their mission,” she said. “And the fact that they are accelerating such a big part of the economy should be a real wake up call for us.” She has since left her full-time role at the company after a health condition worsened.

OpenAI is now trying to seize on its recent momentum to turn the tables in the AI race. 

The company recently released a “super app” that integrates Codex with ChatGPT and a web browser, and said it has boosted the number of users for the new product, plus the stand-alone Codex app, to 10 million users. This month, it released a new model, called GPT 5.6 Sol, that became an instant hit with developers—and led Anthropic to extend access to its own powerful Fable model to compete. 

It is also benefiting from a broader industry backlash against Anthropic, which has been accused of trying to keep cheaper, Chinese models out of the U.S. 

OpenAI has recently “nailed the day-to-day experience for developers and knowledge workers,” said Dan Shipper, the chief executive of Every, a media and software company focused on AI. “I would put a lot of money on OpenAI winning back the mandate of heaven a bit from Anthropic.”

The Global AI Race

Coverage of advancements in artificial intelligence, selected by the editors

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OpenAI’s Planned Cloud Spending Hits $750 Billion

The Anthropic Fable Ban Is Over, but Not the Battle Over How to Tame AI

AI CEOs Call for Law Protecting Against Biological Weapons

Phoenix Built an Empire of Cubicle Jobs. AI Is Tearing It Down.

AI Superstars Who Say ‘Vibe Slop’ Crisis Is Coming

‘A’ Grades Are Suddenly Everywhere Due to ChatGPT

Anthropic Was Behind. Now It’s the AI Front-Runner.

The setting for this experiment was as surreal as it was grand: a hotel in a $100 billion, Chinese-built luxury development in Malaysia that became a mostly empty ghost city.

Now two years in, his vision—called the Network School—is colliding with the real world.

Participants complained about moldy rooms, dead nightlife and not enough women—a downside familiar to Silicon Valley.

Then came an even bigger hurdle: the actual country they were living in.

Malaysian authorities launched an investigation into the school’s residents after an Instagram post said the project housed citizens from Israel. Muslim-majority Malaysia doesn’t officially recognize that state and requires Israelis to get special permission to enter the country. Authorities said they haven’t found wrongdoing.

But last week the local government ordered the project to shut down over unrelated licensing issues. Within hours, Srinivasan said on social media that he had signed an agreement to open a campus in Kazakhstan.

Balaji Srinivasan, founder of the Network School. Chan Long Hei/Bloomberg News

In a response to questions for this article, Srinivasan wrote on X that the Instagram post was a hoax, and that “we respect Malaysia’s sovereignty and are abiding by all Malaysian law.”

He said mildew is a common regional issue his team fixes as necessary. People came to the Network School for self-improvement rather than partying, and there were plenty of women, he added. “We are absolutely not simply for the ‘tech bro,’ but for the tech dad, tech mom, tech family, and tech children,” Srinivasan said.

Other tech leaders are trying to carve out independent enclaves. Patri Friedman, a software engineer and grandson of economist Milton Friedman, first tried building floating city-states, and then launched a fund to seed “startup cities.” He said investors and advisers include Srinivasan, Peter Thiel and Marc Andreessen.

One of its investments is Próspera, launched on a Honduran island in 2017, offering residents low taxes and light regulation. But Honduras’s legislature soured on such special economic zones and moved to end them. Próspera sued the state. A project spokesman said Próspera operates under Honduran sovereignty, and it created jobs and brought investments to the country.

Srinivasan said that in the distant future, the Network School may get its own special economic zone, or “we may build an artificial island from reclaimed land off the shore of a willing country, or we may even accompany Elon to Mars.”

‘The state is against you’

Srinivasan, 46, grew up on Long Island the son of Indian immigrant physicians. He once said he was bullied at school as “the only brown kid among hundreds of people”—and then unfairly punished for physically defending himself. “I learned early on that you’ve got to stand up for yourself, that the fix is in.…The state is against you.”

After earning Stanford engineering degrees, he co-founded a genetic screening company, worked at venture-capital firm Andreessen Horowitz and was briefly chief technology officer at cryptocurrency exchange Coinbase.

“Balaji is a brilliant guy,” Coinbase head Brian Armstrong said in a podcast last year, adding that he brought “an enormous amount of value.”

Srinivasan was also “kind of unmanageable,” he said. “About once a week, someone would come into my office as CEO and say, ‘I can’t work with Balaji, and he’s causing so much collateral damage.’”

Srinivasan said on X that he doesn’t start conflict for the sake of it. “In general I am mostly good cop and a reluctant bad cop,” he said.

The Network School was set up in 2024 inside a hotel in Forest City, a $100 billion, largely empty Chinese-built luxury development.

New societies

Srinivasan is an advocate of boosting Earth’s birthrate, in part to settle new frontiers.

“You’re going to need a lot of people,” he said at a 2023 conference for the movement known as pronatalism, “because a lot of people are going to die in space exploration, and there’s a lot of planets out there.”

Srinivasan also believes few countries that predate the internet will survive, and that the U.S. in particular is on the decline, driven by political polarization. 

“In like one generation, it becomes at a minimum like Protestant-Catholic or Sunni-Shiite or something like that,” he said in a 2022 podcast. Combined with factors including inflation and a heavily armed population, he said “American anarchy, unfortunately, is sort of where we’re heading.”

In his 2022 book, “The Network State,” Srinivasan offered a peaceful alternative, saying it is better to build new societies from scratch.

The Network School was ordered to cease operations last week due to licensing irregularities. 

The Network School was ordered to cease operations last week due to licensing irregularities. 

His playbook: First, people with shared beliefs form an online community. Next, members help each other earn money, pool funds to acquire land and, once big enough, seek recognition as a state.

To test the concept, Srinivasan headed to a nearly deserted artificial island about 100 miles from the equator.

On the southern tip of Malaysia, seaside high rises built for tens of thousands of people sit mostly empty. The development, Forest City, is a symbol of China’s real estate bust, defined by overborrowing and overbuilding at home and abroad.

The area sits across the bridge from the wealthy city-state of Singapore, where Srinivasan said he is now a citizen. Federal records indicate he and his wife renounced American citizenship in 2023.

In 2024, Srinivasan rented space in a hotel and opened the Network School. Part tech incubator, part self-improvement retreat, it started at $1,500 a month for room and board, classes and beachside digs. People could live there or stay for as short as a month. Families could hire nannies.

Srinivasan said the first cohort drew 128 people, while the second, in 2025, offered 256 spaces. Recent attendees estimated a few hundred participants at a time. 

The idea was for people to come and learn, work on their business, and hit the gym and eat right to gain the strength to build their own utopias elsewhere. “You should apply if you want to build yourself up while also building a startup society that bootstraps other startup societies,” its website said.

The reality

On a recent weekday, about two dozen foreign attendees worked on laptops in the Network School’s cafe, which sold health supplements including creatine and collagen peptides. Some chatted about coding while, elsewhere in the hotel, a dozen children ran around.

Current and former residents raved about the sheer convenience and camaraderie with fellow adventurers. Srinivasan’s ideology was a draw for Pranit Garg, a 29-year-old digital nomad who moved here in March, but his favorite part was the gym and all-you-can-eat protein.

“Come for the vision,” he said. “Stay because you’re getting jacked.”

Early applicants were quizzed on their views on topics including capitalism and pronatalism. But by the time Priyansha Dhoot attended this April, she had to only write an essay about why she wanted to attend. The 26-year-old college program manager from India wanted to jump-start her career after a breakup.

Dhoot loved the community, but not the ghost-town nightlife. “I ended up exploring the duty-free alcohol shops,” she said. “That only lasts you a day.”

A co-working space of the Network School near the main building was also ordered to shut down.

The government standoff

Before his clash with Malaysian authorities, Srinivasan had said the Network School didn’t seek sovereignty and would abide by local laws. The project was just the early steps of a seven-stage process to start new societies, he said.

Then came the passport dispute.

Earlier this month, an Instagram post by a pro-Palestine group said the school admitted Israeli citizens, including one who used a second passport. Malaysia requires Israelis to obtain permission before entering.

Immigration officials came to the campus to inspect passports. Srinivasan responded with public fury on social media, likening the Instagram accusation to “swatting”—the hoax of tricking SWAT teams into targeting someone—and demanded a meeting with the prime minister’s office.

“Alternatively, if you don’t want our investment, or those of our colleagues at billion dollar funds and trillion dollar companies,” he wrote, “we will of course respect your wishes, and reallocate our capital to other countries instead.”

An official said in a news conference last week that authorities hadn’t found evidence of wrongdoing and the investigation was ongoing. But the local government separately ordered the project to cease operations, citing licensing irregularities. Malaysian authorities didn’t reply to requests for comment.

A few hours later, Srinivasan posted a video of himself alongside a Kazakhstani deputy prime minister—a former executive at crypto exchange Binance—signing an agreement to open a Network School campus there.

Srinivasan told the Journal that several countries offered to house his project. Kazakhstan has been courting foreign companies by setting up special economic zones with no corporate income taxes and easy visas. 

“Our new campus will become a haven for global techno-optimism,” Srinivasan said on X.

Garg, the Network School resident, said he was open to moving. 

“Being nomadic is in my nature, so my inclination is to say yes to new adventures,” he said. But whether it is to follow Srinivasan’s ideology, he said, “on a day to day, I’m not really thinking about that.”