The AI sector is undergoing a reality check. Anthropic's deliberate and measured strategy is creating visible competitive pressure on OpenAI. Meanwhile, Databricks is experiencing accelerating revenue growth despite the fact that rising AI demand is putting a strain on its profit margins. Furthermore, reports of the "death of SaaS" are greatly exaggerated. Established companies like Box and Salesforce are demonstrating that AI-enhanced incumbents can successfully adapt and even thrive in this new technological era.
High Stakes in the AI IPO Pipeline
Anthropic is back in the spotlight with renewed attention on its potential IPO. According to the FT, the company has hired Wilson Sonsini Goodrich & Rosati — the firm behind IPOs for Google, LinkedIn, and Lyft. Anthropic has also held early, informal conversations with major investment banks, though sources describe the discussions as preliminary.
Any listing would test investor appetite for loss-making AI companies at a moment when talk of an “AI bubble” is getting louder.
Meanwhile, OpenAI is reportedly exploring a $1 trillion IPO. Whether that number survives contact with public-market reality is another question — but the race is clearly on.
On the secondary market this past year, both OpenAI and Anthropic have been difficult to buy. Anthropic, however, tended to trade with wider spreads and more bid-heavy activity, reflecting both scarcity and uncertain price discovery.
OpenAI Shifts Into Crisis Mode
OpenAI CEO Sam Altman has declared a company-wide “code red”, telling employees that ChatGPT is at a “critical time” as competitive pressure from Google and others intensifies. The directive shifts OpenAI’s focus toward immediate performance improvements in ChatGPT, pulling resources away from several other initiatives.
As part of the pivot, OpenAI is delaying advertising experiments and slowing development on its broader product lineup — including AI agents for shopping and health, and Pulse, the personalized morning briefing tool. ChatGPT’s quality will determine OpenAI’s ability to raise the $100 billion it believes it needs to sustain the cash burn ahead.
It’s a striking reversal. Three years ago, Google declared its own “code red” in response to ChatGPT’s threat to Search. Now OpenAI is the one responding to a tightening competitive field.
Altman also highlighted image generation as a priority area within the code red, with a renewed push behind Imagegen, which powers ChatGPT’s visual creation features. That urgency follows Google’s release of Nano Banana Pro, its latest image model, which drew strong early reviews.
The Databricks Trade-Off: Growth vs. Profitability
Databricks has raised its sales forecast twice this year. The company moved its 2025 projection from $3.8B to $4B in September, and then nudged it slightly higher again. Databricks now expects 55% revenue growth this year — an impressive acceleration at its scale.
In the same time the company has told investors that its gross margin is falling faster than expected, sliding to 74% versus an earlier plan for 77%, largely because customers are consuming more of its AI products — a pattern also visible in Snowflake and other data-infrastructure peers.
Operationally, Databricks is running roughly breakeven, with about $10M in free cash flow projected this year. That’s a dramatic improvement from the hundreds of millions it was burning as recently as 2023, but still well below the free-cash-flow margins of similarly sized public peers like Palantir and Snowflake.
ByteDance Emerges as a Cloud AI Leader
ByteDance may be best known in the U.S. as the parent of TikTok, but in China it’s rapidly emerging as a serious challenger in cloud computing—strong enough now to threaten Alibaba, the long-time leader in the space.
One clear sign of tension: Alibaba executives have begun zeroing in on the segment where ByteDance has the advantage—cloud-based access to AI models.
According to IDC, ByteDance is currently leading the AI-models-as-a-service market with more than 37% share in the first half of the year. The category itself is exploding, growing more than fivefold year over year to 1.29 billion yuan (~$182 million). Alibaba trails at 21%.
Wealthfront Targets $2B Valuation in IPO
Wealthfront is pushing ahead with one of the few tech IPOs expected before year-end. The company has begun its roadshow and released an updated prospectus setting its price range at $12 to $14 per share, implying a valuation between $1.8B and $2.1B.
Wealthfront is profitable and plans to raise up to $300 million in the offering, with existing shareholders selling as much as $184 million. The largest seller is Tiger Global, which is looking to unload roughly $100 million—close to one-third of its stake.
SaaS Isn’t Dead After All
Cautious Optimism is optimistic about SaaS this week. He reports that SaaS may be staging a quiet comeback. Earnings across the sector show early signs of AI-driven momentum, with companies like Box, Salesforce, Snowflake, Asana, and UiPath beating expectations and raising guidance as new AI features begin to monetize. Box is seeing stronger billings and longer contracts driven by Box AI, while Salesforce reported explosive ARR growth in its Agentforce and Data 360 products—evidence that incumbents with deep data moats can successfully reposition as AI-first platforms.
Despite years of predictions that AI-native startups would overrun legacy SaaS, the latest results suggest the opposite: well-positioned SaaS companies are adapting fast and showing real commercial lift from AI.
Mistral Launches New Model Suite and Steps Into Robotics
Mistral AI rolled out a major upgrade this week with the launch of Mistral 3, a full family of open-weight models spanning small edge-friendly variants to a new flagship, Mistral Large 3. Early benchmarks position it as a frontier-class alternative with a strong performance-to-cost ratio.
Alongside the model release, Mistral has formed an internal robotics team focused on developing AI models that can operate in physical environments.
More Deals Across Energy, AI, and Infrastructure
Black Forest Labs, a German startup that develops AI for image and video generation and editing, raised $300 million in Series B funding at a $3.25 billion valuation.
Eon, a cloud data-backup platform, raised $300M at a $4B valuation in a Series D.
Angle Health, an AI-powered healthcare benefits startup, closed a $134M Series B.