What Went Wrong & Is the AI Bubble Bursting?

Remember when OpenAI’s Sora dropped and half of Hollywood started quietly updating their CVs? The text-to-video AI was supposed to be the future of creativity. Filmmakers panicked. Disney signed a billion-dollar deal. The internet braced for an avalanche of AI-generated cinema. And then… it just died.

On 24 March 2026, OpenAI CEO Sam Altman informed staff that the company would be shutting down Sora, just six months after launching a dedicated mobile app, and just three months after inking a landmark deal with Disney. The announcement hit the tech world like a plot twist nobody saw coming. Except, well, maybe they should have.

From Jaw-Dropping To Pulling The Plug

When Sora 2 launched in September 2025, it genuinely looked like magic. It generated stunningly realistic videos, raised Hollywood alarms, and even triggered a formal complaint from Japanese content group CODA, whose members include Studio Ghibli, demanding OpenAI stop using their content for training. The app shot to No. 1 on the App Store as creatives experimented and the hype machine roared.

But hype doesn’t pay the bills.

Sora’s worldwide user count peaked at around a million before collapsing to fewer than 500,000. Meanwhile, the app was burning through roughly US$1 million every single day, not because people loved it, but because video generation is extraordinarily costly to run. Every AI-generated vacation video of someone’s cat at the Eiffel Tower was quietly draining a finite supply of GPU chips. That’s a tough business model to keep running constantly.

Disney’s “Oh No” Moment

Perhaps the most cinematic detail in this whole saga is what happened to Disney. The entertainment giant had committed US$1 billion to the Sora partnership, a three-year deal allowing users to generate AI videos with over 200 Disney, Marvel, Pixar, and Star Wars characters. It was supposed to be revolutionary. Fans generating their own Star Wars adventures. Mickey Mouse cameos on demand.

Disney’s tech team apparently found out Sora was being shut down, less than an hour before the public announcement. The deal died with it. A Disney spokesperson graciously said they “respect OpenAI’s decision to exit the video generation business,” which is corporate-speak for what on earth just happened.

The Real Villain: The Cost Of Computing

So was this sabotage? A pivot? An elaborate data grab? According to a Wall Street Journal investigation, the real explanation is considerably more mundane. Sora was simply a money pit that nobody was really using, and keeping it alive was costing OpenAI its edge in the AI race.

The deeper issue is computing scarcity. Researchers from Hugging Face found that text-to-video generators use up a staggering amount of energy compared to text-based chatbots, and OpenAI’s financial filings confirmed the company was burning through many billions of dollars per quarter. When you’re fighting for GPU resources against your own coding tools and enterprise products, something has to go, and apparently “watch Mickey Mouse fight Thanos” loses to “help a developer write Python.”

Meanwhile, Anthropic was quietly winning over software engineers and enterprises, and Claude Code, in particular, was eating OpenAI’s lunch.

The Creative Industry Had Already Moved On

Here’s the twist that stings the most. By the time OpenAI pulled the plug, much of the creative industry had already left Sora by the wayside.

“The truth is we had already moved on to other tools that better fit the way our creative teams work,” said Tim McCraken, SVP Creative and AI at agency BarkleyOKRP. Other platforms like Kling and Nano Banana were gaining serious traction, while models from ByteDance, Runway, and KlingAI have proven themselves as effective alternatives to Sora 2. OpenAI had a flashy launch, a viral moment, and then watched users quietly trickle out the back door.

So Is The Bubble Bursting?

Not exactly, but it’s definitely letting out some air. OpenAI is now expected to focus on a new “superapp” that lets users deploy AI agents for multistep tasks, territory where Anthropic has already excelled. The era of let’s build everything and see what sticks appears to be giving way to something more focused, more enterprise-oriented, and frankly, more boring.

Sora’s demise carries lessons for the entire tech sector: if traditional AI firms ignore the public’s growing exhaustion with AI slop, they may soon repeat OpenAI’s costly miscalculation.

Here’s the thing though, the demand for AI video didn’t die with Sora, it just moved elsewhere, and alternatives like Seedance are poised to fill in the gap. Seedance is ByteDance’s AI video generator, built by the same company that brought us TikTok. Not only does it have the backing of one of the world’s dominant social media platforms, it appears to offer a lot more than what Sora has been able to with regards to video prompts and references, even with its free tier.

The AI bubble isn’t bursting, but it is growing up. The wild, experimental phase of “throw everything at the wall and see what sticks” is colliding with the cold reality that investors eventually want returns. Chips are expensive, and users are fickle.

Sora was a spectacular bet on a future that didn’t quite arrive on schedule. And in the AI era, six months is apparently long enough to know whether you’ve built the future, or just a very expensive toy.

The Sora web and app experiences will be fully discontinued on 26 April 2026. Export your videos while you still can.