OpenAI continues to get pushback, but only stands to gain from going for-profit

It’s been said that “the enemy of my enemy is my friend” — and this appears to be exactly what’s playing out with Elon Musk and Mark Zuckerberg when it comes to OpenAI.

Zuckerberg’s Meta has joined Musk’s xAI in calling for authorities to stop the Sam Altman-headed company from pursuing for-profit status. Both claim that OpenAI is essentially defrauding the public by masquerading as a nonprofit — after all, its name signifies its original intent to serve as an open AI platform.

Elad Inbar, CEO and founder at robotics company RobotLAB, agreed. “OpenAI was supposed to be what its name says: An open AI platform, for the benefit of humanity,” he told CIO. However, “having a board that’s focused on profits and going for the AGI [artificial general intelligence] holy grail is inherently conflicting with the ‘not for profit’ statement.”

OpenAI poses a threat to Meta and xAI should it become for-profit, but, ultimately, the company can do nothing but gain from such a move, noted an analyst. 

“If OpenAI wants to be a truly transformational company and exceed current valuation expectations, for-profit is a must,” said Paul Baier, CEO, co-founder, and principal analyst at generative AI consultancy GAI Insights. “It is a must-do path to earning hundreds of billions in revenue from companies over the next year.”

Meta expresses deep concern

The idea of becoming a for-profit has been floated by OpenAI nearly from the start — and it has been a matter of continued contention in the industry.

This ratcheted up last week, as first reported by The Wall Street Journal, when Meta Platforms sent a letter to California Attorney General Rob Bonta, saying that it was “deeply concerned” about OpenAI’s attempts to remove its non-profit status.

“Failing to hold OpenAI accountable for its choice to form as a non-profit could lead to a proliferation of similar start-up ventures that are notionally charitable until they are potentially profitable,” the letter read.

Meta claimed that OpenAI is taking advantage of its non-profit status and is “flouting the law,” raising billions as a charity that could result in enormous private gains.

Further, the letter urged Bonta to examine OpenAI’s best practices, and called for openness and transparency in the field of AI.

The letter added to the concerns voiced in a lawsuit Musk filed in August against OpenAI, claiming the company is putting profits and commercial interests before the public good. He expanded that suit in November, adding Microsoft as a defendant, and making antitrust claims.

OpenAI, for its part, fired back in an extensive blog post, saying: “Elon Musk wanted an OpenAI for-profit.” The post illustrated its assertions by reproducing several email interactions with Musk over the course of the nine years since OpenAI launched in December 2015.

But as early as 2017, the company said, “Our research progress led us to realize we would need billions of dollars for the compute to build AGI.” That summer, OpenAI and Musk agreed for-profit was the next step.

Musk was involved as a co-chair until resigning in February 2018; in the years between, according to OpenAI, he “demanded majority equity, absolute control, and to be CEO of the for-profit.” The SpaceX founder departed OpenAI entirely in March 2019.

It’s worth noting that the company has continued to be plagued by leadership and board issues: Several founders have left and leadership has cycled in and out; then there was the notorious four-day-long firing-then-rehiring saga of CEO Altman in November 2023.

But the company has continued to persevere, raising billions and launching what it calls its “capped-profit subsidiary” OpenAI LP, in March 2019. Then, in November 2022, the company released the world-changing ChatGPT.

“For OpenAI to grow into a massive valuation, they need to become a highly strategic vendor to large companies,” said Baier. He pointed out that large companies are willing to spend “tens and hundreds of millions” with strategically important vendors such as Microsoft or SAP.

“OpenAI has to be and act ‘traditional’ if they want to tap into billions of enterprise spending over the next decade,” he said, pointing out that a for-profit setup also enables an eventual IPO.

Ownership wars of the largest-ever economic engine

Inbar pointed out that in the AI world, there is no “fair” competition or second-best — it’s a winner-take-all situation.

“Imagine a race to get up and down a slide,” he said. “The first to get to the top of the slide may be just inches ahead of the others, but the moment they start sliding, the gap opened is so much larger than the inches at the top that it is impossible to catch up any more.”

Going for-profit will help OpenAI maintain superiority, with stable funding from shareholders, he noted. On the other hand, though, the public will no longer be able to benefit from, contribute to, or influence AI development.

“There are enough large investors who are not limited in their ability to invest, and that are more than happy to own the biggest invention in the history of humanity, literally,” he said. “Doing that is going to start ownership wars over the largest economic engine ever created.”