Updated Mar 1, 2024 - Business

OpenAI's terrible, horrible, no good, very bad week

Illustration of the openAI logo as a bomb with a fuse

Illustration: Natalie Peeples/Axios

OpenAI isn't having the best week. The latest development is Elon Musk suing the burgeoning tech giant, alleging that it violated its founding agreement.

Why it matters: If Musk is successful, he would basically take a Boring-branded flamethrower to the billions of dollars invested in OpenAI.

  • Including money from some of the VC firms that helped fund his Twitter takeover, such as Sequoia Capital and Andreessen Horowitz.
  • And, just to make things a bit more convoluted, many of those same VC firms are expected to have equity in Musk's own, for-profit AI company.

Even if unsuccessful — and Musk's legal track record is decidedly mixed — it still could prove to be a costly distraction for OpenAI, hurt its reputation, and leave breadcrumbs for an ambitious state attorney general to take up the mantle.

Earlier in the week, OpenAI's deep-pocketed partner Microsoft invested a small amount in French rival Mistral. It's not quite an affair, but it's also not a building block for solid marriage.

  • Then came a WSJ report that the SEC is investigating whether OpenAI investors were misled during last November's boardroom brouhaha, in which CEO Sam Altman was fired and then rehired. This is on top of an existing FTC investigation into antitrust issues.

Zoom in: Musk's lawsuit specifically targeted the part whereby OpenAI would be an open-source nonprofit focused on developing AI "for the benefit of humanity."

  • Musk, who claims to have contributed $44 million to OpenAI between 2016 and 2020, alleges breach of contract, breach of fiduciary duty, and unfair business and accounting practices.
  • Here's a quick refresher on OpenAI's odd structure.

The bottom line: Silicon Valley remains Elon's world, and OpenAI is just living in it.

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