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A CONSORTIUM led by Elon Musk has made an audacious US$97.4 billion bid to acquire OpenAI, the organisation behind the highly successful AI technology firm.
The bid underscores Musk’s ongoing effort to challenge OpenAI’s shift from a nonprofit to a for-profit model, intensifying the already strained relationship between Musk and OpenAI CEO Sam Altman, Reuters reported on Tuesday.
In a move that has further escalated tensions between the two, Altman swiftly dismissed the offer on social media, suggesting that Musk might instead want to purchase Twitter for US$9.74 billion if he was seeking a deal.
Musk and Altman co-founded OpenAI in 2015 as a nonprofit aimed at developing artificial intelligence in a way that benefits humanity. However, Musk departed from the company before it became a major player in the field of AI. In 2023, he launched his own competing AI firm, xAI.
Musk's offer is part of a broader campaign to prevent OpenAI from transitioning to a for-profit structure.
OpenAI argues that such a shift is necessary to raise the capital required for developing cutting-edge AI models.
Musk, however, has consistently criticised the move, arguing that it prioritises profits over the public good. In fact, he filed a lawsuit against OpenAI and its leadership in August 2024, accusing them of violating the original agreement to focus on AI for the greater good.
This legal battle intensified in November when Musk sought a U.S. district court injunction to block the nonprofit’s conversion into a for-profit entity.
According to Musk, OpenAI has deviated from its original mission. “It's time for OpenAI to return to its roots as an open-source, safety-focused organization that serves the public,” Musk said, reiterating his belief that OpenAI should remain committed to its nonprofit ideals.
Musk’s offer sets a clear marker for how the nonprofit’s economic interests should be valued, and he has pledged to ensure that the company stays true to its foundational purpose.
OpenAI's management, which includes Microsoft as a major backer, did not respond immediately to requests for comment.
However, the company’s stance on its for-profit transition remains firm.
According to Rose Chan Loui, executive director of the UCLA Law Center for Philanthropy and Nonprofits, Musk’s bid introduces complications into OpenAI's process of removing the nonprofit’s control over its for-profit entity.
Loui added that if OpenAI values the nonprofit's economic interests at a lower figure than Musk’s bid, the organization would be under pressure to justify this.
Musk’s consortium includes his own company xAI, as well as Baron Capital Group, Emanuel Capital, and other investors. There are also reports suggesting that xAI could merge with OpenAI as part of the deal, potentially reshaping the competitive landscape in AI development.
The move comes as OpenAI is reportedly nearing a new funding round led by SoftBank, which is expected to value the company at US$300 billion. OpenAI’s valuation in its last funding round stood at US$157 billion, making it one of the most valuable private companies in the world.
However, Musk’s US$97 billion bid introduces a formidable new variable.
OpenAI is under intense pressure to decide which offer it will pursue, with experts pointing out that Musk’s consortium could offer a more competitive deal.
Jonathan Macey, a professor of corporate governance at Yale Law School, said, “This bid certainly complicates matters. If OpenAI chooses to accept a lower offer, it would need to provide a compelling explanation to its stakeholders.”
To finance such a large bid, Musk would likely need to leverage substantial assets.
His stock in Tesla is valued at approximately US$165 billion, but his recent financial commitments, such as the US$44 billion acquisition of Twitter in 2022, may limit his ability to borrow.
Potential sources of financing include selling part of his Tesla stake, borrowing against it, or utilising his holdings in SpaceX, which is valued in the tens of billions.
The debate surrounding OpenAI’s future is likely to intensify as Musk’s offer prompts more questions about the company’s direction.
Analysts, such as Gil Luria from D.A. Davidson, was quoted by Reuters saying, Musk’s bid could significantly disrupt OpenAI’s ongoing efforts to raise funds and solidify its transition to a for-profit model.
With Musk’s consortium drawing attention as a more credible bidder, the OpenAI board will face tough decisions in the coming months.
As the situation unfolds, the future of OpenAI and its relationship with Musk will continue to shape the rapidly evolving AI industry. – February 11, 2025
