Tesla and SpaceX CEO Elon Musk in 2020. (Hannibal Hanschke / Associated Press)
A bitter rift between two Silicon Valley billionaires could shape the future of the fast-growing artificial intelligence industry.
Tesla Chief Executive Elon Musk, who has his own AI startup, is duking it out in court and in a public war of words with Sam Altman, leader of ChatGPT maker OpenAI.
Musk, who is the world's richest man and has the ear of President Trump, has referred to the San Francisco-based OpenAI chief executive as "Scam Altman." Meanwhile, Altman told Bloomberg that Musk is not "a happy person." Musk and Altman, along with several others, co-founded OpenAI in 2015.
Underlying the personal feud is Musk's legal challenge to OpenAI, which threatens to slow the company's efforts at a time when the race for the lead in the AI space is heating up. Musk sued OpenAI last year for fraud, breach of contract and fiduciary duty over OpenAI's efforts to change its corporate structure. He's looking to the courts for an injunction to stop the company's "unlawful" conduct and seeking compensation for damages and fees.
OpenAI has disputed many of the claims in Musk's lawsuit.
"I wish he would just compete by building the better product, but I think there's been a lot of tactics, many, many lawsuits, all sorts of other crazy stuff. ... We'll try to just put our head down and keep working," Altman told Bloomberg.
It began as a nonprofit company and later launched a for-profit subsidiary to oversee its commercial operations. Its product ChatGPT has millions of users and is a household name, helping bring generative AI into the mainstream.
But with competition ratcheting up from Google, Amazon and others, OpenAI needed to raise significantly more money. To make that process easier, it embarked on a plan to explore changing the for-profit subsidiary to a public benefit corporation.
That move irked early OpenAI investors like Musk, who said he invested more than $44 million from 2016 to 2020 in OpenAI under the belief it would remain a nonprofit serving humanity and not become beholden to shareholders concerned about profits.
"OpenAI’s conduct could have seismic implications for Silicon Valley and, if allowed to stand, could represent a paradigm shift for technology start-ups," Musk said in court records filed last year.
On Tuesday, a judge ruled against Musk's request for a preliminary injunction that would prevent OpenAI from changing its corporate structure. However, some allegations Musk made against the company will go forward in a trial, unless the dispute is settled.
In court filings, Musk alleged that OpenAI has veered away from its founding principles. Musk said he invested significant money, helped recruit talent under that premise, served as co-chair and came up with the name "OpenAI."
But Musk had a falling out with OpenAI's leaders after they could not agree on the future of the start-up.
Musk said in court filings that in 2017 to 2018 Altman and OpenAI co-founder Greg Brockman wanted to "recast the nonprofit as a moneymaking endeavor." Musk bristled, writing in an email, "Either go do something on your own or continue with OpenAI as a non-profit," according to legal documents. Musk stepped down from the board in 2018.
How has OpenAI responded?
OpenAI says Musk's lawsuit is simply meant to slow down a rival. The company alleges that Musk, while he was still on the board, wanted to take control of the start-up or bring it under Musk's electric car company Tesla, which OpenAI did not believe was in its best interest.
Since leaving OpenAI, Musk became a direct competitor. In 2023, he launched xAI, which developed AI assistant Grok and has raised billions in funding.
"We're sad that it's come to this with someone whom we’ve deeply admired — someone who inspired us to aim higher, then told us we would fail, started a competitor, and then sued us when we started making meaningful progress towards OpenAI’s mission without him," the company said on its website last year.
OpenAI said it welcomed the court's decision denying Musk's request for a preliminary injunction.
"This has always been about competition," OpenAI said in a statement this week. "Elon's own emails show that he wanted to merge a for-profit OpenAI into Tesla. That would have been great for his personal benefit, but not for our mission or U.S. interests."
Last month, Musk led an investment consortium to make an unsolicited offer to buy OpenAI for $97.4 billion, which OpenAI's board rejected. OpenAI said it is not for sale.
Legal experts and tech analysts says the case could play out in multiple ways.
"The ultimate question is, is this a case of altruism versus greed, as Musk portrays, or is this a case of kind of corporate monopolistic prevention, as Altman and OpenAI present?" said Neil Elan, a partner with law firm Stubbs Alderton and Markiles LLP. "It's too early to tell."
Gene Munster, managing partner of Minneapolis-based Deepwater Asset Management, said that, at the highest level, it's "understandable" that Musk is frustrated.
"I think his motivations are, he felt like he got ripped off," Munster said.
But Rob Enderle, principal analyst at advisory services firm Enderle Group, said he thinks it's "hypocritical" that Musk is bringing up these claims against OpenAI, when Musk is hugely wealthy. He's worth more than $340 billion, according to Forbes.
"His real goal is to take the company over, and it has nothing to do with what he's actually presenting," Enderle said, adding he thinks the case should be dismissed.
The judge said she is prepared to expedite the trial to this fall to deal with the central issues of the case, though "ancillary claims" would have to be tabled to fit that timeline.
Marc Toberoff, Musk's attorney, said they plan to accept the court's offer.
"We're pleased the Court has offered an expedited trial on the core claims driving this case, which in its words present 'urgent' issues in the public's interest," Toberoff said in a statement. "We look forward to a jury confirming that Altman accepted Musk's charitable contributions knowing full well they had to be used for the public's benefit rather than his own enrichment."
If a jury rules in Musk's favor, it would have huge implications for OpenAI.
Such a result could have an unraveling effect of potentially implicating many of OpenAI's relationships and contracts with business partners, including Microsoft, which is one of its backers, experts said.
"This might not only spell trouble for OpenAI, but it also might result in an avalanche of unintended consequences," said Elan.
Alternatively, if the case went OpenAI's way, there could be attorneys' fees and damages awarded to the firm and Altman. Musk might not be able to recover his investment in OpenAI, Elan said.
While it is possible Musk and OpenAI could settle, Elan thinks it's unlikely, given the unique personalities involved.
"Settlement requires a concession of the weaknesses of one's perception, perspective and claims, and it will be difficult, in my view, for such strong, big personalities to make such concessions," Elan said. "It's unlikely that both sides will be able to put that aside for the benefit of obtaining immediate closure."
