OpenAI reportedly facing issues with its new AI model is a red flag for the entire industry

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Good morning! Tired of having to check your email when you're supposed to be off the clock? A growing number of countries are implementing laws that make those late-night emails from your boss illegal.

In today's big story, OpenAI's next big AI model isn't showing massive improvement over previous versions, and it could be a sign of a new era.

What's on deck:

• Markets: Prediction markets were one of the big winners of the election. So now what?
• Tech: The key role YouTube played in helping Trump get elected.
• Business: These companies have signaled they might increase prices because of Trump's trade plans.

But first, not so fast.

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The big story

Big leaps to baby steps

The fastest-growing sector of tech is facing a serious speed bump.

OpenAI's next artificial intelligence model, Orion, reportedly isn't showing the massive leap in improvement previous versions have enjoyed. That's leading to bigger questions about how quickly we can expect future generative-AI models to keep getting better, writes Business Insider's Hasan Chowdhury and Beatrice Nolan.

Some OpenAI employees who have used and tested Orion told The Information its improvements are only moderate and smaller than what users saw going from GPT-3 to GPT-4.

It's an astounding revelation when you consider the stakes. OpenAI is considered the leading AI company, and we're learning that its most important new product may not be that much better than something it released about 20 months ago — a lifetime in the AI industry.

It also undermines a core assumption about the future of generative AI: If you add more data and computing power, you get smarter and more powerful AI models. This "scaling law" is the consensus view now, yet OpenAI is reportedly struggling with it.

Top AI players have eye-popping valuations based on the promise that AI models will keep getting smarter and better with time. If that growth trajectory slows, it could lead to difficult questions, particularly from investors bankrolling the hundreds of billions of dollars companies are pouring into these projects.

So what's holding AI models back from making another big jump?

AI models are already burning through text, with one estimate predicting they'll run out of material by 2028. Companies are trying to circumvent the issue with synthetic data, but that might not be a viable solution.

Using more computing also comes with limitations and has the added hurdle of needing significant power. The biggest companies in the world are struggling to find cost-efficient energy sources for the massive data centers they're building as part of their AI strategy.

There was always an expectation that things might slow down a bit. In July, one OpenAI customer told BI he thought the newest iteration would be like going from undergrad to a PhD program, as opposed to the jump from GPT-3 to GPT-4, which was like "grade school to undergrad."

More resources can help address those issues to a degree, but the improvements still might not mirror what we saw in the early days of generative AI. If that's the case, investors might be unwilling to open their wallets for something they view as having diminishing returns.

Even if they shell out the cash, companies will likely price their products accordingly to recoup those investments. That's a tricky proposition, as "good enough" is fine for plenty of users.

News brief

Top headlines

• New York Times tech workers are ending their strike.
• Anthony Scaramucci tells BI Trump's economic plans could cause a 1920s-style stock-market crash.
• Bitcoin hits fresh record near $85,000 as investors keep cheering 'crypto president' Trump.
• The winners of Wall Street bonus season this year: the underwriters.

3 things in markets

1. Betting markets are taking their victory lap and already thinking about what's next. Besides Donald Trump — and maybe Elon Musk — betting markets were arguably one of the biggest winners on election night, having predicted a resounding Trump victory. Insiders spoke to BI about how the betting markets' success could impact traditional polls and the media.
2. Morgan Stanley teams up with Carta on the eve of an IPO boom. Carta, which helps startups and investors track company ownership, will refer clients looking to go public to Morgan Stanley. Jed Finn, the bank's wealth boss, explained how the partnership will benefit both sides in an exclusive interview with BI.
3. Putting a number on the impact of Trump's potential tax cuts. Goldman Sachs said the S&P 500 earnings could rise more than 20% over the next two years if Trump cuts corporate taxes like he said he would. The president-elect's blanket tariff proposal could have the opposite effect, but Wharton professor Jeremy Siegel said Trump's so focused on appealing to investors he might soften his economic agenda to suit them better.

3 things in tech

1. This election, social media killed the TV star. Donald Trump spent a lot of time on the campaign trail with podcasters like Joe Rogan, who have huge YouTube followings and benefit from the platform's content-recommendation algorithm. Now, the Trump administration might turn away from TV and embrace new media even further, given the president-elect's bromance with X owner Elon Musk.
2. A $3 billion healthcare startup just cut some physical therapists as it turns to AI. Sword Health, which provides virtual care for problems like muscle and joint pain, laid off more than a dozen of its clinical workforce in October, three former employees told BI. The cuts came as the startup ramps up its AI platform to treat patients.
3. Trump's trade plan could make things muy difícil for Elon Musk. Tesla's planned $10 billion gigafactory in Mexico will hit a major roadblock if Trump pursues the massive tax he's discussed putting on vehicles imported from Mexico. Musk isn't alone — analysts warned tariffs on imported cars from Mexico would seriously hurt US automakers.

3 things in business

1. Trailblazing for a sustainable future. Solving the climate crisis will take innovation and action across industries like energy, transportation, agriculture, and finance. BI identified 15 entrepreneurs, policymakers, organizers, and academics around the globe confronting the crisis head-on.
2. Expect the price of these goods to go up if Trump enacts his trade plan. Three executives have already warned they plan to raise prices if the president-elect implements the aggressive tariff proposal he campaigned on. "It's going to be very, very difficult to keep products affordable for Americans," one CEO said.
3. Key players in Trump administration 2.0. From the wily campaign strategist who will be the first female presidential chief of staff to the ex-ICE director tapped to be "border czar," these are the people shaping key policies for the next 4 years.

What's happening today

• New York judge Juan Merchan rules on claims of presidential immunity in Donald Trump's hush-money case. Trump's defense has argued that the prosecution should not have been allowed to use some evidence in the case.
• Jack Teixeira, the national guardsmen who pled guilty to leaking sensitive military documents on Ukraine online, is sentenced in Massachusetts court.
• Home Depot and other companies report earnings.

The Insider Today team: Dan DeFrancesco, deputy editor and anchor, in New York. Grace Lett, editor, in Chicago. Ella Hopkins, associate editor, in London. Hallam Bullock, senior editor, in London. Amanda Yen, fellow, in New York. Milan Sehmbi, fellow, in London.