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Elon Musk’s feud with OpenAI CEO Sam Altman, explained

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A deep, acrimonious split among two wealthy tech magnates from Silicon Valley might significantly influence the trajectory of the rapidly expanding AI sector.

Elon Musk, CEO of Tesla and the founder of an AI company, is engaged in both legal battles and verbal sparring matches with Sam Altman, head of OpenAI, the organization responsible for creating ChatGPT.

Elon Musk, the wealthiest individual globally and known for his close ties to President Trump, has labeled OpenAI’s CEO as a “scam artist.” Conversely, Altman told Bloomberg that Musk is not a content person. Both Musk and Altman, along with others, established OpenAI in 2015.

Behind the public disagreement lies Elon Musk’s ongoing legal dispute with OpenAI, a conflict that could potentially hinder their progress at a point when the competition in AI technology is intensifying. Last year, Musk filed a lawsuit against OpenAI, claiming fraud, breach of contract, and negligence regarding their attempts to alter their corporate structure. He’s now seeking a court order to halt what he deems as unlawful actions by the company, and is also pursuing compensation for any damages and legal costs incurred.

OpenAI has disputed many of the claims in Musk’s lawsuit.

Instead of focusing on creating a superior product, it seems like he’s resorted to various strategies such as numerous lawsuits and questionable tactics. However, we’ll simply continue to focus on our work and stay committed. This is what Altman conveyed to Bloomberg.

OK, back up. What’s going on with OpenAI?

OpenAI has an unusual business model.

Originally established as a not-for-profit entity, it eventually created a for-profit affiliate to manage its business activities. One of its creations, ChatGPT, boasts millions of users and has become synonymous with many households, playing a significant role in popularizing generative artificial intelligence.

As the competition intensified from companies like Google and Amazon, OpenAI recognized they required a substantial increase in funding. To facilitate this, they decided to consider transforming their for-profit subsidiary into a Public Benefit Corporation (PBC), which would make the fundraising process smoother.

As a passionate movie-goer, I’d rephrase that statement like this: Back in the day, some early investors in OpenAI, including Musk, felt frustrated because they invested over $44 million from 2016 to 2020 under the impression that it was a nonprofit organization dedicated to benefiting humanity. However, their concern was that it might start focusing more on shareholder profits instead.

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A tech company specializing in AI technology has been criticized for reportedly launching chatbots that negatively impacted the mental well-being of younger users.

What does Musk allege?

In simpler terms, Elon Musk stated that OpenAI’s actions might lead to significant changes in the Silicon Valley tech industry, possibly marking a new approach for technology start-ups, as mentioned in documents submitted to the court last year.

On Tuesday, it was decided by a judge not to grant Elon Musk’s application for a temporary order, which aimed to stop OpenAI from altering its business structure. Nevertheless, the claims Musk has raised against the company are still set to be heard in court, unless the disagreement is resolved first.

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On Monday, OpenAI announced plans to make their debated video-generation tool accessible to the general public, offering various subscription options.

As an ardent cinephile who’s always had a soft spot for the dream of open-source AI, I can’t help but feel a pang of disillusionment. You see, when I put my hard-earned cash on the line, gathered top talent with the promise of this shared vision, took on a co-chair role, and even suggested the very name “OpenAI,” it was all based on the belief that we were united by these founding principles. Yet, it appears that OpenAI has strayed from its roots, and I can’t help but wonder if our original dream is still alive.

However, disagreements about the company’s future direction led to a rift between Musk and the management team at OpenAI.

In court filings, it was reported that in the time frame of 2017 to 2018, Sam Altman and Greg Brockman, co-founders of OpenAI, aimed to transform the non-profit organization into a profitable business venture. This move caused Elon Musk to express his disapproval, as evidenced by an email in which he stated, “Either pursue something independently or carry on with OpenAI as a non-profit”. Later in 2018, Musk decided to step down from the board of OpenAI.

How has OpenAI responded?

According to OpenAI, Elon Musk’s lawsuit is intended to hamper a competitor. The organization claims that during his tenure on the board, Musk aimed either to acquire control of the start-up or assimilate it into Tesla, his electric vehicle company. However, OpenAI felt this move was not in line with their best interests.

After departing from OpenAI, Elon Musk emerged as a rival company owner. In the year 2023, he unveiled xAI, an organization that created the AI assistant named Grok and managed to secure billions in financial backing.

Last year, our company expressed regret that things had reached this point with an individual whom we held in high esteem – someone who once motivated us to reach for greater heights, only to later tell us we would fall short, establish a rival business, and eventually file a lawsuit against us as we moved forward on the path towards achieving OpenAI’s mission without him.

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On Tuesday, President Trump presented the Artificial Intelligence (AI) project, standing alongside representatives from OpenAI, Oracle, and SoftBank.

OpenAI said it welcomed the court’s decision denying Musk’s request for a preliminary injunction.

In a recent statement, OpenAI expressed that the situation has primarily revolved around competition. It was revealed that Elon’s personal emails indicated a desire to combine a profit-driven OpenAI with Tesla. Such an integration would have been advantageous for him personally, but it wouldn’t align with our mission or serve the best interests of the U.S.

In the previous month, Elon Musk spearheaded a group of investors in submitting an uninvited bid worth $97.4 billion to purchase OpenAI. However, OpenAI’s board declined this proposal, stating that they are not open to being sold.

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On Monday, several U.S. technology stocks, like Nvidia, Oracle, and Broadcom, experienced a significant drop in value following the announcement by Chinese startup DeepSeek that they’ve developed an AI system capable of competing with chatbots such as OpenAI’s ChatGPT, at notably reduced costs.

What do experts think of the case?

Legal experts and tech analysts says the case could play out in multiple ways.

Neil Elan, a partner at the law firm Stubbs Alderton and Markiles LLP, posed an interesting question: “Is this situation more about altruism versus greed, as Musk suggests, or is it possibly corporate monopolistic behavior, as Altman and OpenAI imply?” He concluded that it’s still too early to make a definitive conclusion.

According to Gene Munster, the managing partner of Deepwater Asset Management based in Minneapolis, it’s quite reasonable for Elon Musk to feel irritated at a fundamental level.

“I think his motivations are, he felt like he got ripped off,” Munster said.

However, Rob Enderle, a principal analyst at the advisory services firm Enderle Group, expressed his view that it’s inconsistent (hypocritical) for Elon Musk to accuse OpenAI of financial mismanagement when he himself boasts a fortune exceeding $340 billion, as per Forbes.

Enderle stated that his true intention is to seize control of the company, which appears unrelated to what he’s publicly discussing. He further suggested that this case should not proceed.

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The proposal made by Elon Musk’s investment team to acquire OpenAI, valued at approximately $97.4 billion, was turned down by the board of directors at OpenAI. According to the chairman of the board, OpenAI is currently not up for sale.

What happens next?

The judge indicated she’s ready to move up the court date for this trial, scheduling it for this fall, so as to address the main points of the case promptly. However, any secondary or supporting claims may need to be postponed to accommodate this timetable.

Marc Toberoff, Musk’s attorney, said they plan to accept the court’s offer.

Toberoff expressed satisfaction that the court has agreed to speed up the trial on the key points of this case, which it considers ‘pressing’ matters in the public interest. He is eager for a jury to determine that Altman was aware Musk’s charitable donations were intended for the public good, not personal gain.

Hollywood Inc.

A number of screenwriters for films and television shows express shock that their work is being utilized by technology firms to educate Artificial Intelligence systems, allegedly without their consent. These authors are urging production companies to pursue legal measures in response.

What are possible outcomes?

If a jury rules in Musk’s favor, it would have huge implications for OpenAI.

This outcome might lead to an unraveling impact on numerous connections and agreements between OpenAI and its business associates, such as Microsoft, one of its investors, according to experts. Alternatively, this finding could have the effect of potentially revealing complications in many of OpenAI’s partnerships and deals with their corporate allies, including Microsoft, who are among OpenAI’s financial supporters, as experts suggest.

Elan mentioned that this could potentially cause problems not just for OpenAI, but it could also trigger a chain reaction of unexpected outcomes,” or more casually, “Elan suggested that this could bring trouble to OpenAI and possibly set off a series of undesired events.

If OpenAI prevails in this case, it could result in legal costs being paid by the opposing side and compensation given to the firm and Altman. As for Musk, he may not get back the money he invested in OpenAI, according to Elon.

It’s quite doubtful that a settlement will occur between Musk and OpenAI, according to Elan, due to the distinctive characters at play.

Reaching an agreement means admitting the flaws in one’s viewpoint, and I believe it could be challenging for powerful individuals to do so. It seems doubtful to me that both parties will be willing to set aside their differences for the sake of quick resolution.” (Elan said)

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2025-03-10 13:31

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