In a surprising turn of events, Meta CEO Mark Zuckerberg and X owner Elon Musk have found common ground in their opposition to OpenAI’s planned transition from nonprofit to for-profit status, despite their long-standing rivalry spanning nearly a decade. Meta formally requested California Attorney General Rob Bonta to block OpenAI’s conversion, accusing Sam Altman’s company of “taking advantage” of its nonprofit status to raise billions in funding.
In a strongly worded letter, Meta argued that OpenAI should not be allowed to “flout the law by taking and reappropriating assets it built as a charity and using them for potentially enormous private gains.” The company warned that failing to hold OpenAI accountable could lead to a proliferation of startups that operate as nonprofits until they become profitable, setting a dangerous precedent.
This move aligns Meta with Elon Musk’s ongoing legal battle against OpenAI. Musk, one of OpenAI’s 11 original cofounders who departed in 2018, filed for an injunction in November to prevent the transition. His legal filing alleges that OpenAI and Microsoft have collaborated to build a “for-profit monopoly” engaging in anti-competitive behavior that targets his own AI venture, xAI.
OpenAI fired back with a blog post titled “Elon Musk wanted an OpenAI for-profit,” publishing emails and messages dating back to November 2015. These communications show Musk questioning the nonprofit structure from the beginning, writing to Altman that “the structure doesn’t seem optimal.” OpenAI claims Musk left in 2018 because he believed the organization’s “probability of success was 0.”
The stakes are enormous in this AI industry showdown. OpenAI announced a $6.6 billion funding round in October, raising its valuation to $157 billion, with the stipulation that it must convert to for-profit status within two years. Meanwhile, Meta plans to invest up to $37 billion on AI infrastructure costs alone this year, while Musk’s xAI secured $5 billion in funding last month. The battle represents not just a legal dispute, but a fundamental conflict over the future structure and governance of leading AI companies as they compete for dominance in the rapidly evolving artificial intelligence landscape.
Key Quotes
OpenAI wants to change its status while retaining all of the benefits that enabled it to reach the point it has today. That is wrong. OpenAI should not be allowed to flout the law by taking and reappropriating assets it built as a charity and using them for potentially enormous private gains.
Meta stated this in its letter to California Attorney General Rob Bonta, articulating the core legal and ethical argument against OpenAI’s conversion. This quote captures Meta’s position that OpenAI is attempting to have it both ways—benefiting from nonprofit advantages while pursuing for-profit gains.
Failing to hold OpenAI accountable for its choice to form as a nonprofit could lead to a proliferation of similar startup ventures that are notionally charitable until they are potentially profitable.
Meta warned in its letter about the broader implications of allowing OpenAI’s transition, suggesting it could create a dangerous precedent where startups exploit nonprofit status for fundraising advantages before converting to for-profit entities once successful.
Also, the structure doesn’t seem optimal.
Elon Musk wrote this in an email responding to Sam Altman’s proposal for a Delaware-based nonprofit structure in 2015. OpenAI published this email to counter Musk’s current legal opposition, suggesting he questioned the nonprofit model from the very beginning.
Our Take
The irony of this situation is striking: Musk, who apparently wanted a for-profit structure from day one, is now fighting to keep OpenAI nonprofit, while Zuckerberg’s Meta—itself a for-profit giant—is championing nonprofit accountability. This suggests the opposition is less about principle and more about competitive strategy in the AI arms race. Both Meta and xAI stand to benefit if OpenAI faces legal obstacles that slow its momentum or force it to operate under more restrictive nonprofit constraints. The real question is whether California regulators will intervene in what is essentially a commercial dispute dressed in nonprofit ethics clothing. This case will test whether existing nonprofit laws can adequately govern the unique circumstances of AI companies that started with altruistic missions but now require massive capital to compete. The outcome could fundamentally reshape how AI companies structure themselves and whether mission-driven AI development remains viable in an industry increasingly dominated by profit motives and billion-dollar valuations.
Why This Matters
This development marks a pivotal moment in AI industry governance and competition. The dispute over OpenAI’s nonprofit-to-for-profit conversion raises fundamental questions about how AI companies should be structured, funded, and held accountable as they develop increasingly powerful technologies. If OpenAI succeeds in its transition while retaining assets built under nonprofit status, it could establish a precedent that other AI startups might follow, potentially undermining public trust and charitable regulations.
The unusual alliance between Zuckerberg and Musk—two fierce competitors who have publicly feuded for years—underscores the high stakes of AI market competition. With Meta investing $37 billion, OpenAI valued at $157 billion, and xAI raising $5 billion, the battle for AI dominance involves unprecedented capital flows. This legal fight will likely influence how future AI companies structure themselves, how regulators approach AI governance, and whether the technology remains aligned with public benefit missions or becomes purely profit-driven. The outcome could reshape the competitive landscape and determine which companies control the most transformative technology of our generation.
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Source: https://www.businessinsider.com/mark-zuckerberg-feud-elon-musk-openai-public-for-profit-2024-12