Elon Musk Wants OpenAI to Be Forced Into Selling a Portion of Itself

Elon Musk enjoys being at the center of the universe. If generative AI is going to be as transformational as Silicon Valley believes, he cannot lose. Especially not to a company he helped start. To that end, Musk continues throwing more spaghetti at the wall in his attempt to slow down OpenAI, the company he co-founded in 2015 and that now competes against his own rival startup xAI.

According to a report in the Financial Times, lawyers for Musk have contacted attorneys-general in Delaware and California to request that a large stake in the company be sold off in an open auction process. Musk has not had a good relationship with the courts in Delaware, hence the interest in moving proceedings to California where OpenAI is headquartered.

The details are complicated, but essentially, OpenAI has been working towards transitioning from a non-profit into a for-profit entity. Under the new structure, a non-profit subsidiary would remain inside OpenAI that would hold a stake in the for-profit company and continue working on philanthropic initiatives in areas like healthcare and education. Musk, having put initial capital into OpenAI when it was founded as a non-profit, seems to be arguing it would be in the best interest of the non-profit entity to sell its stake and use the capital for philanthropic purposes. It would, of course, give him an opportunity to get involved in and have influence over OpenAI again.

Through a series of lawsuits, Musk has made a few arguments to try and blunt OpenAI’s growth, including that he was deceived into investing in the company under the impression that it would always remain a non-profit with the purpose of developing AI safely and making it available freely for anyone to use. He has for a long time now used the term “ClosedAI” to ridicule the company and allege that it has in fact kept its technology closed off to itself.

Another reason he has argued in court that OpenAI should not be allowed to convert into a for-profit is because doing so would mean it was able to grow into the giant it is today without paying any taxes for years, giving it an unfair advantage over for-profit startups like his own.

Musk left OpenAI’s board in 2018 over disagreements about its strategy, and seemingly out of spite, founded xAI in 2023.

Musk is not the most sympathetic character, particularly given his company is competing directly with OpenAI and seems to have been launched out of bitterness for being left out of OpenAI as it became the hottest startup in the world. But OpenAI is not exactly worth defending either. After receiving tens of billions of dollars in funding from Microsoft and others, launching commercial products with monthly subscriptions, and keeping much of its technology to itself rather than open-sourcing it, few have truly believed that OpenAI was honoring the intention and purpose of the non-profit model. Meta, which does actually open-source its models, and several other parties including a non-profit focused on AI safety have joined in on Musk’s lawsuit.

If OpenAI were forced to remain a non-profit, as Musk hopes, the company would have a hard time raising more funding needed to compete in the AI race (most investors want a clear path to realizing a return). Musk’s xAI has quickly been catching up with billions of dollars raised that has been used to scale up a massive supercomputer cluster for model training, and because Musk owns X, formerly Twitter, he has been able to integrate it deeply with the social network.

Musk is set to be one of the most influential people in the incoming Trump administration, where he could potentially cause the startup headaches through investigations or simply by thwarting its influence on legislation. On top of that, OpenAI is facing other headwinds. Among them, Microsoft, its biggest backer, has been distancing itself and building up its own AI models; OpenAI continues to be embroiled in legal battles with media companies including the New York Times over allegations it has participated in massive copyright infringement through its model training; and CEO Sam Altman was personally sued this week by his own sister over allegations he sexually abused her as a child.