Peak of the slop? The Sora slide could spark an AI avalanche

(SeaPRwire) –   OpenAI had placed significant financial hopes on its video-generation platform. Its recent discontinuation could signal further difficulties for the company.

OpenAI has unexpectedly ceased operations for Sora, its generative AI video model. Despite an initial surge in popularity, the technology faced persistent issues with controversy and copyright, ultimately proving to be excessively costly.

A major setback for OpenAI occurred simultaneously with Sora’s termination: a $1 billion agreement from December 2025, which would have allowed Sora users to create AI videos featuring Disney characters, was canceled.

The company did not provide an official reason for Sora’s shutdown, though analysts attribute it to poor financial performance. With the AI sector appearing to be in a speculative bubble, many are questioning if Sora’s failure could mark the beginning of a broader downturn, especially as geopolitical tensions, such as the war on Iran, strain supply chains and escalate energy expenses.

What was Sora?

Sora was an AI-powered text-to-video platform developed by OpenAI, capable of generating cinematic-quality, high-definition videos from written prompts. Introduced in 2024 and launched as a standalone application in September 2025, it rapidly climbed to the top position on Apple’s US App Store.

The videos it produced were, by all objective standards, impressive. Furthermore, at a time when most AI video tools generated four-second clips that often lacked cohesion, Sora could create up to 60 seconds of visually consistent footage.

The application featured a “cameos” function, enabling the integration of real individuals into AI-generated videos. However, this feature sparked controversy from its inception. Beyond potentially infringing or directly violating copyright laws, many users exploited the tool to produce absurd, and frequently offensive, videos. For instance, one video depicted Adolph Hitler and Michael Jackson debating the origin of the moonwalk.

The introduction of Sora (and particularly the enhanced Sora 2) caused widespread alarm within the creative industries, especially in Hollywood. Suddenly, entire performances could be generated instantly, without the need to compensate or even acknowledge the individuals involved. Ultimately, despite its popularity among many users, this type of content struggled to establish a viable economic niche, with many analysts suggesting that its appeal diminished once the novelty wore off.

Media outlet 404 Media offered a scathing critique: “The complete and utter failure of both Sora and Disney’s dalliance with AI garbage suggests AI slop is indeed not the future of Hollywood. Disney did not even get to the point [where] it allowed people to build anything with Disney characters before pulling the plug on the whole endeavor and its investment.”

What do analysts believe is the real reason Sora was axed?

The decision appears to stem from financial considerations, as OpenAI aims to streamline its operations in anticipation of a potential initial public offering as early as this year.

The platform proved to be exceptionally costly. In November, one analyst estimated that generating a single ten-second video cost OpenAI $1.30. Based on his projection of 11.3 million daily videos produced by Sora, this would have amounted to approximately $15 million in daily expenses for the company.

Just weeks prior, Sora’s head, Bill Peebles, conceded that the platform’s financial model was “completely unsustainable.”

According to Business Insider, another significant challenge, which is proving to be a persistent limitation across the AI sector, is computing power. Video generation represents the most energy-intensive form of AI currently in use.

“Given the frantic search for more compute across the industry, OpenAI is prioritizing its greatest growth engine – ChatGPT,” stated Bernard Golden, CEO of Navica.

As the demand for AI computing capacity escalates, supply is failing to keep pace. This is exacerbated by increasing local opposition to new data center construction, insufficient grid capacity, and shortages of crucial components like memory chips.

How frothy is the AI bubble?

Even within Silicon Valley, it is acknowledged that AI exhibits all the characteristics of a bubble. AI stocks are trading at extremely high valuations, even as many of these companies are not yet profitable. OpenAI’s current valuation surpasses that of Toyota, Coca-Cola, and Disney combined.

Time Magazine identified the core issue as a “mismatch between the trillions being invested in the infrastructure to develop AI and the billions people and companies are spending to use AI.” This year alone, four major tech companies—Amazon, Alphabet, Meta, and Microsoft—plan to invest $670 billion in AI infrastructure. This data center expansion is on a scale larger than the railroad buildout of the 1850s.

High levels of leverage have been a common factor in nearly every major historical bubble, and AI is no exception. A particularly debt-heavy aspect of the AI narrative is the construction of data centers. Companies such as CoreWeave have taken on immense levels of debt to fund their infrastructure, banking on AI demand growing rapidly enough to service these obligations.

Furthermore, there is the issue of circular investments. A substantial portion of AI revenue is generated by AI companies selling services to other AI companies, which, while creating significant activity, does not represent substantial organic growth. In fact, relatively little revenue is derived from actual end-users of AI. This also means that risks are highly concentrated should the market experience a downturn.

Why might Sora be the beginning of the end?

The fundamental challenge is OpenAI’s commitment to a staggering $1.15 trillion over the next five years, in contrast to its $13 billion revenue in 2025. Of ChatGPT’s approximately 800-900 million users, only 5% are paying subscribers. OpenAI has limited other avenues for generating substantial revenue, making the monetization of actual usage a critical concern.

OpenAI urgently needs to boost its revenue, and Sora appeared to be a promising avenue. The agreement with Disney seemed to offer an entry point into Hollywood. However, Disney has withdrawn, and other companies might follow suit, especially as the economic realities of AI—particularly in light of compute shortages—begin to outweigh the hype.

This situation also coincides with the war on Iran exposing vulnerabilities in the AI supply chain, notably because East Asian nations, which dominate semiconductor production, have been impacted by significant energy shocks.

Should OpenAI encounter severe difficulties, the entire AI industry would almost certainly be affected. This could represent a pivotal moment for an industry that is largely responsible for sustaining the US stock market.

The Nasdaq is already in correction territory. The index is, in fact, nearing the “Death Cross,” a technical indicator where its 50-day moving average falls below the 200-day moving average. This widely recognized signal suggests a loss of upward momentum and increased selling pressure.

Panic selling is inherently unpredictable, but historical patterns indicate that once it commences, it tends to develop its own momentum.