Meta Urges California Attorney General to Stop OpenAI From Becoming For-Profit
Mark Zuckerberg’s company is siding with Elon Musk in a fight against the developer of ChatGPT
Meta META -1.66%decrease; red down pointing triangle Platforms is urging California’s attorney general to block OpenAI’s planned conversion to a for-profit company, siding with Elon Musk in a battle between Silicon Valley’s most powerful artificial intelligence players.
In a letter to Attorney General Rob Bonta dated Thursday, Meta said allowing the ChatGPT maker to become a for-profit company would set a dangerous precedent of allowing startups to enjoy the advantages of nonprofit status until they are poised to become profitable.
“OpenAI’s conduct could have seismic implications for Silicon Valley,” Meta wrote in the letter. “If OpenAI’s new business model is valid, non-profit investors would get the same for-profit upside as those who invest the conventional way in for-profit companies while also benefiting from tax write-offs bestowed by the government.”
Representatives for OpenAI and Bonta didn’t immediately respond to requests for comment.
Meta is one of OpenAI’s biggest competitors and has invested billions of dollars to develop its own AI technology that matches or exceeds ChatGPT. OpenAI is also closely allied with two large Meta rivals: Microsoft, which is OpenAI’s biggest investor, and Apple, which integrated ChatGPT into its own AI product.
Meta hasn’t previously weighed in on the long-running feud between Musk, who co-founded OpenAI in 2015 and then left amid a power struggle in 2018, and OpenAI Chief Executive Sam Altman.
Musk, who runs a rival company called xAI, has filed a series of legal complaints against OpenAI, the most recent of which was filed last month. He has accused OpenAI of betraying its original nonprofit mission by creating a for-profit arm and colluding with its largest investor, Microsoft, to dominate the development of AI.
In its letter, Meta said it supported an effort by Musk and Shivon Zilis, a business and personal associate, to represent the interests of the public in deciding whether OpenAI will be allowed to become a for-profit company.
“Although we ask your office to take direct action, we believe that Mr. Musk and Ms. Zilis are qualified and well-positioned to represent the interests of Californians in this matter,” Meta wrote.
Meta CEO Mark Zuckerberg and Musk have butted heads in the past. At one point last summer, the two tentatively agreed to fight each other in a cage match, though it never happened.
Musk didn’t respond to requests for comment.
OpenAI recently completed a $6.6 billion funding round valuing it at $157 billion and told investors they could have their money back if it doesn’t become a for-profit company within two years.
On Friday, OpenAI published a series of internal documents meant to rebut Musk’s request last month for a preliminary injunction blocking it from transitioning to a for-profit company.
Musk has argued he was manipulated into believing OpenAI would be a purely nonprofit venture when he initially invested in it.
OpenAI said the documents show that Musk, in fact, previously backed the idea. “When he didn’t get majority equity and full control, he walked away and told us we would fail,” the company wrote on its blog. “Now that OpenAI is the leading AI research lab and Elon runs a competing AI company, he’s asking the court to stop us from effectively pursuing our mission.”
The documents show Musk had his wealth manager register a public-benefit corporation—a for-profit company that is also committed to a social good—called Open Artificial Intelligence Technologies Inc., in Delaware in September of 2017. Two days earlier, Musk wrote OpenAI co-founder Ilya Sutskever an email proposing a for-profit structure in which he would “unequivocally have initial control of the company.”
The Wall Street Journal couldn’t independently verify the authenticity of the documents OpenAI published.
The documents show that, from the earliest days of OpenAI, Musk was somewhat skeptical about its nonprofit structure. When Altman wrote Musk in November 2015 proposing a nonprofit, Musk pushed back, saying the structure didn’t seem optimal. “Probably better to have a standard C corp with a parallel nonprofit,” he responded, referring to a typical for-profit business structure.
In August of 2017, a bot created by OpenAI beat one of the world’s best players at a one-on-one match of Dota 2, a complex multiplayer videogame. Musk emailed his OpenAI co-founders, including Altman, Greg Brockman and Chief Scientist Sutskever, saying, “Time to make the next step for OpenAI. This is the triggering event.”
Over the next six weeks, according to the documents OpenAI published, the co-founders discussed creating a for-profit entity, with Musk proposing a structure in which he would have majority ownership. During this period, Zilis, who was acting as the liaison between Musk and OpenAI, texted Brockman that Musk “sounded fairly non-negotiable on his equity being between 50-60.” Musk then wrote Sutskever an email in September of 2017 proposing that he have initial control.
In January 2018, Musk suggested in an email to Altman, Brockman, Sutskever and Zilis that OpenAI merge with Tesla or else face “certain failure relative to Google.” He left the company later that year.
Musk has become an increasingly aggressive antagonist of OpenAI since it launched ChatGPT in November of 2022, setting off the current boom around generative AI.
Almost immediately, Musk cut off OpenAI’s access to Twitter data.
He also began criticizing a structure set up by Altman in 2019 in which OpenAI has a for-profit subsidiary in which Microsoft and others invested. The for-profit subsidiary’s value skyrocketed following ChatGPT’s debut.
“I’m still confused as to how a non-profit to which I donated ~$100M somehow became a $30B market cap for-profit. If this is legal, why doesn’t everyone do it?” Musk posted in March 2023.