This past spring, former OpenAI CEO Fidji Simo warned employees that the company was at risk of running out of time because it was “distracted by side questions,” referring to expensive software projects like Sora, which OpenAI shut down in April. This week, BloombergMark Gurman shared an update on the company’s emerging hardware efforts, writing that the first OpenAI device will be a “human-like” rechargeable smart speaker. For a non-profit company, this sounds like the very essence of what Simo was hoping to avoid.
In 2026, the market for smart speakers and displays is not growing. “In terms of the trend line, it has been moving slowly for a long time, and we expect it to decline in the coming year,” said Jitesh Ubrani, director of global device trackers at market research firm IDC. He declined to share specific numbers related to the size of the smart speaker market, but said the volume of shipments in recent years has dropped to “tens of millions of units” following 2022 when tech giants, led by Amazon, ship more than 100 million devices.
According to the company’s data, shipments will decrease by 16.3 percent year-on-year in 2023. The following year, it decreased by 11.8 percent. The introduction of Alexa + in 2025 seems to slow the bleeding somewhat, but the market still contracted by 6.7 percent in that year. By the end of this year, IDC estimates it will drop another 9.6 percent before leveling off next year.
In the US, Ubrani attributes the situation to the fact that many people are not upgrading their smart speakers. “[If you’re a consumer]there’s really no need to update your device because the latest features are cloud-based, so you can continue with the same hardware,” he said. “From a use case perspective, there’s not much people do with these devices. They use them for music, podcasts, timers, those kinds of things. It’s a very simple computer.”
For OpenAI, Ubrani believes that establishing a reputation in the market will be difficult. “Creating a device is not difficult, but getting it to reach any kind of scale, it’s very difficult to do because there are players out there, and the category itself hasn’t evolved much,” he said.
One big problem could be the price of the device itself. Bloomberg describes a smart speaker with a camera and sensors to help us understand our surroundings, as well as a rechargeable battery and “autonomous mechanical components.” That sounds a lot more complicated (and expensive) than say the humble Echo Dot.
“Smart speakers for many years have been very inexpensive devices. We’re talking under $100, and those were the best-selling devices,” Ubrani said. “We’ve seen prices go up, but no one views this as a premium category. A lot of people would balk at the idea of spending $300 for a speaker, and anyone entering the category should have affordable options available.”
In accordance with BloombergOpenAI “believes that the defining feature of a product will be its personality and ability to connect with users on a human-like level.” The device will use the company’s new GPT-Live-1 voice model, built on a duplex architecture, giving it the ability to process input simultaneously while producing output. “This allows the model to interact with the environment in advance, maintain a better sense of time, and translate live,” OpenAI said of the technology recently.
Amazon made a similar set of claims when it announced Alexa+ last year. Thanks to artificial intelligence, the company said the new digital assistant can recognize the user’s tone and adapt accordingly. It also provides context awareness, giving you the ability to “remember” earlier parts of a conversation. Despite those improvements, Alexa+ doesn’t seem to have moved the needle for Amazon. “Even after the introduction of smart AI like Alexa + and Gemini, we didn’t see a big change in the way of the market,” said Ubrani.
It is not yet clear whether OpenAI can monetize the smart speaker. Also, let’s look at Amazon, the dominant player in the space. As of 2022, the company has failed to find a sustainable way to monetize Alexa, according to the report Business Insider which was published that year. At the time, the company’s Echo family of smart speakers was among the best-selling products in its market, but Amazon sold most of those devices at cost and failed to find a way to monetize the Alexa partnership.
Per Business Insiderthe biggest problem was that simple requests, like a command to play a music track or a question about the weather, represented the majority of what people used Alexa for, and fulfilling those requests made little money for Amazon. In the first quarter of 2022, the Amazon Worldwide Digital unit, which includes Alexa, Echo Devices and Prime Video, reportedly had an operating loss of $3 billion, “mostly” tied to the digital assistant. Things may have changed at Amazon since then, but aside from announcing that one million people were using Alexa+ by June 2025, the company hasn’t shared many notable milestones since then.
“I don’t know if anyone is making money with hardware or not,” said Ubrani of other major players in the market. “[Companies] mainly use these devices as a vehicle to their ecosystem.”
Despite those concerns, Ubrani says there is at least one way the OpenAI program makes sense. “The industry as a whole agrees that AI is the way forward, but AI can’t just be confined to a browser. It has to understand the world around it to be really useful, and the only way a company like OpenAI can do that is if it has hardware,” he said. “It has to start somewhere, and this is the first way. It’s also the way to enter the hardware market with the least amount of resistance.” He points out that building a smartphone or smart glasses will be more expensive due to the complex supply chains involved in both phases, as well as carrier certification costs for mobile devices.
Still, Ubrani admits it’s hard to make hardware, and there are recent examples of companies failing in the exact market OpenAI is trying to enter. Most famously, Meta ended development of its Portal smart displays in 2022 in a move that saw it deploy 11,000 people at a time. And it’s worth repeating, OpenAI is not profitable. Leaked financial documents show that the company will lose $5.09 billion in 2024 and $38.5 billion in 2025, while OpenAI itself has said it does not expect to make a profit until at least 2030 due to rising AI costs. A smart speaker won’t be the one that helps turn the corner.
