Smart Speakers Could Help OpenAI Lose Even More Money

Fri, 17 Jul 2026 00:00:00 +0000

OpenAI is reportedly developing a “humanlike” rechargeable smart speaker as its debut first-party hardware device — entering a market that is shrinking, fiercely competitive, and historically unprofitable. According to Bloomberg’s Mark Gurman, the device is designed to leverage OpenAI’s advanced voice models and offer a personality-driven interaction that feels more natural than existing smart assistants.

For a company that has never turned a profit, the move raises pointed questions about strategic focus.

A Distracting Side Quest?

The smart speaker plan echoes warnings from former OpenAI executive Fidji Simo, who told employees earlier this year that the company was at risk of “missing its moment” because it was “distracted by side quests” — referring to costly software initiatives like Sora, its video generation app that was shut down in April. Hardware is a significantly bigger bet than software, with supply chain complexity and upfront R&D costs that make Sora’s expenses look modest by comparison.

A Market in Decline

The timing is particularly difficult. According to market research firm IDC, smart speaker shipments have been declining for years. After topping 100 million units in 2022, volumes have shrunk to tens of millions. IDC reports consecutive annual declines of 16.3% in 2023, 11.8% in 2024, and an estimated 9.6% in 2026 — even Amazon’s launch of Alexa+ in 2025 only softened the contraction to 6.7% that year.

IDC’s Jitesh Ubrani noted that most consumers see no reason to upgrade their smart speakers, as new AI features are cloud-delivered to existing hardware. “From a use case perspective, there’s not a whole lot people are doing with these devices. They use them for music, podcasts, timers — it’s very simple compute,” he told Engadget.

The Profitability Problem

Amazon — the dominant player in the space — has demonstrated just how difficult it is to make money from smart speakers. According to a Business Insider report, Amazon’s Echo devices were among the best-selling products on its marketplace, yet the company sold most at cost and failed to monetize Alexa interactions. In Q1 2022 alone, Amazon’s Worldwide Digital unit (which includes Alexa and Echo) reported an operating loss of $3 billion, with the vast majority tied to the digital assistant.

OpenAI faces an even steeper climb. Leaked financial documents show the company lost $5.09 billion in 2024 and a staggering $38.5 billion in 2025. The company has acknowledged it does not expect to be profitable until at least 2030 due to surging AI infrastructure costs. A low-margin hardware play would only deepen those losses.

Premium Features, Commodity Pricing

Bloomberg describes the device as including a camera, sensors for environmental awareness, a rechargeable battery, and “mechanical elements that can move on their own” — specifications that suggest a premium price point. Yet the smart speaker market has historically been dominated by low-cost devices under $100.

“Many people would balk at the idea of spending $300 for a speaker,” Ubrani said. “Whoever enters the category has to have more affordable options available.”

The Voice Model Advantage

OpenAI’s device would be powered by its new GPT-Live-1 voice model, built on a duplex architecture that can simultaneously process inputs while generating outputs — enabling more natural conversation, better timing, and live translations. Amazon made similar claims about Alexa+’s ability to detect tone and mood, yet that hasn’t reversed the market’s trajectory.

Why Hardware at All?

Despite the skepticism, Ubrani acknowledged one argument in favor of the strategy: “AI can’t just be locked in a browser. It has to understand the world around you to be truly helpful, and the only way a company like OpenAI can do that is if they have hardware.”

A smart speaker is also the path of least resistance into hardware. Building a smartphone or smart glasses would involve carrier certification and far more complex supply chains. Still, the graveyard of failed smart displays — including Meta’s Portal, which was killed in 2022 alongside 11,000 layoffs — serves as a sobering reminder of how hard this market is to crack.

Bottom line: OpenAI’s smart speaker ambitions feel less like a product strategy and more like a side quest — the very thing its own executives warned against. In a declining market where even Amazon couldn’t turn a profit, a smart speaker won’t be what helps OpenAI turn the corner.