(Bloomberg) -- Elon Musk is stepping up his efforts to block OpenAI from restructuring as a for-profit company after it received billions of dollars from investors, including early funding from him.
At a court hearing Tuesday, Musk’s lawyers will urge a federal judge to halt OpenAI’s conversion plans while he tries to prove that his fellow co-founder Sam Altman abandoned their public-spirited mission of a decade ago in a quest to get rich off artificial intelligence.
The injunction Musk is seeking could freeze OpenAI’s transformation to a more conventional, public benefit for-profit company, just as it’s in talks to raise as much as $40 billion in a funding round led by SoftBank Group Corp. OpenAI has said shifting the maker of ChatGPT from a non-profit charity to a commercial business is critical to securing the vast amount of funding it needs to fulfill its mission of creating artificial general intelligence — or AGI — that will benefit humanity.
If Musk loses the court fight, it be might be harder for his own AI startup — which has attained a valuation of $50 billion since he launched it in 2023 — to catch up to OpenAI’s considerable lead in raising capital, which is critical to developing more advanced AI.
OpenAI argues that Musk’s claims are without merit and amount to harassment. As the months-long feud escalated, OpenAI publicized a slew of emails and messages indicating the billionaire originally supported a more traditional corporate structure for the startup.
But the world’s richest person is not the startup’s only critic as it seeks regulatory approval to restructure. A youth-led nonprofit group advocating for AI safety, Encode, said in a December court filing it shares Musk’s concerns about OpenAI becoming a for-profit enterprise. Meta Platforms Inc. asked California Attorney General Rob Bonta to pause the restructuring “to protect investors and consumers alike,” while the Federal Trade Commission said in a report just before Donald Trump took office that Microsoft Corp.’s $13 billion investment in OpenAI raises concerns that the tech giant could extend its dominance in cloud computing into the nascent AI market.
The landscape continues to shift since Musk alleged last year that the alliance OpenAI forged with Microsoft after he left OpenAI’s board in 2018 is a bid to dominate the generative AI industry that threatens free market competition by rivals.
The serial entrepreneur has gained significant influence in Washington as a close adviser to President Donald Trump. But that didn’t stop OpenAI from getting top billing in the new administration: The president announced the day after his January inauguration that he was endorsing a $100 billion joint venture including OpenAI, SoftBank, and Oracle Corp. to fund artificial intelligence infrastructure across the US.
In his lawsuit, Musk alleges that OpenAI has violated antitrust laws by making its investors agree not to fund rivals, and also by having overlapping board members with Microsoft, including billionaire Reid Hoffman. Musk garnered support in January from the Biden administration when the Justice Department and Federal Trade Commission said in a court filing that overlapping board directors can harm competition.
If Musk manages to win an injunction, it would stall OpenAI’s discussions with state officials in Delaware and California who must sign off on the for-profit conversion plan.
OpenAI steadfastly denies wrongdoing, labeling Musk’s legal filings as “vexatious” and arguing that he lacks evidence to support his claims. The startup contends that Musk’s real agenda is to advance his startup, xAI, and is asking the judge to dismiss his lawsuit as a bid to “undermine a successful competitor” after he was “unable to seize control” of OpenAI.
“The sweeping relief he seeks would debilitate OpenAI’s business, board deliberations, and mission to create safe and beneficial AI — all to the advantage of Musk and his own AI company,” the startup said in a court filing. Microsoft and Hoffman also have defended their conduct as legal.
Bloomberg Intelligence litigation analysts Justin Teresi and Matthew Schettenhelm said in a research note that Musk’s injunction request will probably be rejected because he hasn’t demonstrated “imminent harm” from the OpenAI restructuring.
“We ascertain an 80% chance Musk’s motion for a preliminary injunction fails and, absent more evidence, a 70% likelihood the lawsuit is thrown out,” the analysts wrote.
Meanwhile, a new threat to OpenAI’s dominance has emerged: Chinese venture DeepSeek, which sent shockwaves through the AI industry after it released an open-source AI mode last month that was competitive with technologies from OpenAI and other leading US technology firms. In a recent closed-door meeting with DC policymakers, Altman said that the rise of DeepSeek underscores the need for the US to support AI infrastructure.
The case is Musk v. Altman, 4:24-cv-04722, US District Court, Northern District of California (Oakland).
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