2/11 – Economic News & Analysis Piece

In an escalation of the ongoing rivalry between tech billionaires Elon Musk and OpenAI CEO Sam Altman, a group of investors led by Musk has made an unsolicited offer of $97.4 billion to acquire OpenAI. The bid, announced on Monday, aims to revert the company to its original nonprofit structure, intensifying an already complex legal and strategic battle over the future of one of the world’s most influential artificial intelligence firms.

Elon Musk, who co-founded OpenAI in 2015 alongside Altman and other tech leaders, was a key early investor, contributing approximately $45 million to the organization. Initially conceived as a nonprofit dedicated to the safe and open development of artificial intelligence, OpenAI later evolved into a for-profit model in 2019 under Altman’s leadership. Musk resigned from the board in 2018 and has since been openly critical of the company’s shift, particularly its increasing ties to Microsoft.

Musk’s legal challenges against OpenAI began last year, accusing the company of straying from its foundational mission. His lawsuits, filed both in California state court and later in federal court, argue that OpenAI’s transformation into a for-profit entity violates its original commitments to the public interest.

Musk’s latest move—a formal offer to acquire OpenAI’s nonprofit division and return it to a research-focused, publicly beneficial institution—was met with immediate rejection from Altman. In a post on Musk’s own social platform, X (formerly Twitter), Altman quipped, “No thank you, but we will buy Twitter for $9.74 billion if you want.” The response, dripping with irony, alluded to Musk’s 2022 acquisition of Twitter for $44 billion and signaled Altman’s unwillingness to engage in negotiations.

Despite Altman’s dismissal, Musk’s proposal introduces a new dimension to OpenAI’s ongoing transition. The company is in the process of finalizing its conversion into a traditional corporate entity, with plans to spend up to $500 billion on AI infrastructure through a joint venture called Stargate. The bid from Musk’s investor group—comprising xAI, Baron Capital Group, Valor Management, Atreides Management, Vy Fund, Emanuel Capital Management, and Eight Partners VC—complicates these plans by raising fresh questions about valuation and governance.

Musk’s attorney, Marc Toberoff, has called for a transparent and competitive bidding process to determine the fair market value of OpenAI’s nonprofit assets. In a letter sent in early January to the attorneys general of California and Delaware, Toberoff argued that any transaction affecting OpenAI’s charitable assets must ensure fair compensation to protect the public’s interests.

Legal proceedings surrounding OpenAI’s transition to a for-profit entity are already underway. U.S. District Judge Yvonne Gonzalez Rogers recently presided over a hearing in which Musk’s attorneys sought to block OpenAI’s restructuring. While the judge expressed skepticism about Musk’s claim of irreparable harm, she acknowledged concerns regarding OpenAI’s relationship with Microsoft. She ruled that the case would not be dismissed and could proceed to trial in 2026.

OpenAI’s valuation has soared in recent months. A recent funding round in October pegged the company’s worth at $157 billion, and it is reportedly in discussions to raise up to $40 billion in a new round that could push its valuation to $300 billion. Investors, including Japanese conglomerate SoftBank, are negotiating stakes, with SoftBank potentially contributing between $15 billion and $25 billion.

Musk’s bid challenges OpenAI’s ability to finalize these negotiations. Meta Platforms, a rival in AI development, has also raised concerns, sending a letter to California’s attorney general in December opposing OpenAI’s restructuring. Given that Altman and OpenAI’s board are still determining how to distribute equity in the new company, Musk’s high-profile offer could impact negotiations and disrupt investment plans.

Beyond the financial and legal dimensions, Musk’s intervention reignites fundamental debates about AI governance, ethics, and control. Musk has positioned himself as a champion of open-source AI, arguing that OpenAI’s collaboration with Microsoft contradicts its original mission of democratizing AI research. His statement that OpenAI should return to being a “safety-focused force for good” underscores his broader concerns about centralized AI development.

Altman, on the other hand, has defended OpenAI’s evolution, emphasizing the necessity of large-scale investment to compete with tech giants like Google and Meta. In a message to OpenAI employees following Musk’s bid, Altman reassured staff that “our structure ensures that no individual can take control of OpenAI.” He framed Musk’s efforts as a distraction aimed at undermining the company’s momentum.

Musk’s aggressive bid and legal maneuvers reflect deeper power struggles in the AI industry. His insistence on returning OpenAI to its nonprofit roots aligns with his long-standing warnings about AI’s existential risks. However, critics argue that Musk’s actions are not purely altruistic; xAI, his competing AI venture, would likely benefit from a weakened OpenAI.

Conversely, Altman’s firm rejection of Musk’s bid signals his confidence in OpenAI’s trajectory. His sarcastic response on X suggests that he views Musk’s offer as unserious, if not outright disruptive. However, legal uncertainties and investor concerns could make OpenAI’s transition to a for-profit model more complicated than anticipated.

The coming months will determine whether Musk’s intervention gains traction or if OpenAI successfully moves forward with its ambitious plans. If the legal battles persist, a jury trial could ultimately decide the fate of OpenAI’s nonprofit assets. Regardless of the outcome, the Musk-Altman conflict underscores the high stakes of AI development and the fierce competition for control over its future direction.