Elon Musk Seeks to Block OpenAI’s Conversion to Fully For-Profit Business
Elon Musk, his AI startup xAI, and former OpenAI board member Shivon Zilis have filed a motion for a preliminary injunction against OpenAI, seeking to stop the company from converting into a fully for-profit business. The injunction would also prohibit OpenAI from allegedly requiring its investors to refrain from funding competitors, including xAI and others.
The latest court filings represent an escalation in the legal feud between Musk, OpenAI, and its CEO Sam Altman, as well as other long-involved parties and backers, including tech investor Reid Hoffman and Microsoft. Musk had originally sued OpenAI in March 2024 in a San Francisco state court, before withdrawing that complaint and refiling several months later in federal court.
Attorneys for Musk argue that OpenAI has violated federal racketeering, or RICO, laws, and that Microsoft and OpenAI have violated antitrust laws by asking investors to agree to not invest in rival companies, including xAI. The attorneys also claim that OpenAI should be prohibited from “benefitting from wrongfully obtained competitively sensitive information or coordination via the Microsoft-OpenAI board interlocks.”
OpenAI has emerged as one of the biggest startups in recent years, with its ChatGPT technology becoming a major hit. The company is in the process of being converted into a fully for-profit public benefit corporation, which could make it more attractive to investors. Microsoft has invested nearly $14 billion in OpenAI, but the company is expected to record a $1.5 billion loss in the current period largely due to an expected loss from OpenAI.
The attorneys for Musk argue that OpenAI’s conversion to a fully for-profit business would give the company an unfair advantage over competitors, including xAI. They also claim that OpenAI’s alleged group boycott of investors would block xAI’s access to essential investment capital.
OpenAI has denied the allegations, with a spokesperson calling Musk’s latest complaint “utterly without merit.” The company has faced increasing competition from startups such as xAI, Anthropic, and tech giants such as Google. The generative AI market is predicted to top $1 trillion in revenue within a decade, and business spending on generative AI surged 500% this year.
