Why Sam Altman is smiling: ChatGPT has suddenly kicked into a higher gear.

Sam Altman has several reasons to smile these days.

He welcomed his first child into the world recently, and the kid is learning to eat. You can't top that.

But Altman's other baby, ChatGPT, is flourishing, too. The AI chatbot has added millions of new users in recent weeks and months, making OpenAI a more serious challenger to Google and other internet giants.

"Something seems to have kicked into a higher gear in terms of AI product adoption," Barclays tech analysts wrote in a recent note to investors.

ChatGPT just added 100 million users in two months, the fastest cohort adoption in two years, they noted. "As a result, we have increased our forecast for AI adoption in both consumer and enterprise."

o1, o3, oh my!

I asked OpenAI about what's been driving this growth spurt. They didn't respond. The Barclays analysts suggested several reasons, though.

OpenAI rolled out a new type of "reasoning" AI model late last year. Called o1, it uses an approach called test-time or inference-time compute that slices queries into smaller tasks, turning each into a new prompt that the model tackles. The startup also quickly launched an updated version known as o3.

The Barclays analysts credited other new OpenAI products, too, such as Deep Research and a multi-modal AI model that can handle other types of queries beyond text.

All about distribution

The technology is important, for sure. But the internet business is mostly about distribution. You think you have a great product, now how are you going to get it in front of a billion people?

The best distribution tool in the Western World is currently the iPhone. More than a billion people are glued to these gadgets for hours a day, so getting a prominent position on the devices is key.

About nine months ago, Altman pulled off a coup here. Apple and OpenAI unveiled a partnership that integrates ChatGPT deeply into iPhones and other Apple devices.

The Barclay's analysts listed this iOS integration as another likely factor leading to the accelerating growth of ChatGPT.

The new Google?

Mark Mahaney, a top internet analyst at Evercore ISI, uncovered more good news for Altman this week.

The brokerage firm conducted its fourth quarterly survey of online search habits, polling more than 1,000 US people. Mahaney and colleagues found that adoption of new generative AI versions of search has risen "meaningfully" lately.

"First-mover ChatGPT commands the #1 position in Gen AI Adoption at 37% (vs. 23% in June '24), followed by Google (Gemini or AI Overview) at 27% (vs. 17% in June)," the analysts wrote. "Particularly interesting is the ramping ChatGPT adoption among Gen Z."

For both Gen Zs and Millennials, ChatGPT has emerged as the clear GenAI winner so far, according to Evercore ISI's survey data.

This OpenAI tool has reached 55% penetration among Gen Z and 50% among Millennials. Google trails at 33%.

Google has dominated online search for so long, so these numbers are pretty stunning.

No wonder Altman is smiling.