Elon Musk-led group’s $97.4 billion bid for control of nonprofit OpenAI raises stakes in AI battle with Sam Altman

A consortium led by Elon Musk has offered $97.4 billion to buy the nonprofit that controls Sam Altman-led OpenAI, in what has became the billionaire’s latest move to block the start-up’s transition into a for-profit company, according to a Reuters report.

The consortium led by Musk includes his AI startup xAI, Baron Capital Group, Emanuel Capital and others, the report added.

Elon Musk Raises Stakes in Battle With Sam Altman

The bid is likely to escalate long-drawn tensions between Elon Musk and Sam Altman, who have previously clashed over the airtificial intelligence powerhouse’s move away from nonprofit status to for-profit. OpenAI claims it needs to pivot to for-profit to “secure the capital needed for developing the best AI models”, as per the report.

In a statement on February 10, Elon Musk said: “It’s time for OpenAI to return to the open-source, safety-focused force for good it once was. We will make sure that happens.”

After news of the bid hit, Sam Altman took to Elon Musk owned X (formerly known as Twitter), to say: “no thank you but we will buy twitter for $9.74 billion if you want.” (sic)

Elon Musk and OpenAI’s biggest financial backer, Microsoft, did not respond to queries till time of writing, the report added.

Elon Musk’s History with OpenAI, Battle With Sam Altman

Notably, Sam Altman and Elon Musk cofounded ChatGPT-maker OpenAI in 2015 as a nonprofit, but the latter left before the company took off. The Tesla and SpaceX owner then founded competitor xAI in 2023, the report noted.

In August 2024, Elon Musk sued Sam Altman and other OpenAI executives for allegedly violating contract provisions and putting profit ahead of public good in order to advance AI. In November the same year, her asked a US District judge for a preliminary injunction blocking OpenAI from converting to a for-profit structure, the report noted.

And when Donald Trump recently announced a $500 billion AI project spearheaded by OpenAI, SoftBank and Oracle, Elon Musk was a vocal critic. He has spent around $250 million on Trump’s campaign to become United States president and is now a close ally, heading the Department of Government Efficiency, or “DOGE” as its been dubbed.

According to a Wall Street Journal report, if the Musk-led group’s offer is accepted, xAI could merge with OpenAI. The Reuters report added that as per sources, xAI recently raised $6 billion from investors for a valuation of $40 billion.

Elon Musk Making Things Difficult for OpenAI?

Rose Chan Loui, executive director of the UCLA Law Center for Philanthropy and Nonprofits told Reuters that Elon Musk’s bid “puts another wrinkle into OpenAI’s quest to remove the nonprofit’s control over its for-profit entity”, adding, “This bid sets a marker for the valuation of the nonprofit’s economic interests. If OpenAI values the nonprofit’s interests at less than what Musk is offering, then they would have to show why.”

Jonathan Macey, a Yale Law School professor specializing in corporate governance told the news agency, this bid is “definitely throwing a wrench in things”, adding, “The nonprofit is supposed to take money to do whatever good deeds, and if OpenAI prefers to sell it to somebody else for less money, it’s a concern for protecting the interests of the beneficiaries of the not-for-profit.”

How is Elon Musk Likely to Navigate an OpenAI Takeover?

OpenAI was valued at $157 billion in its last funding round, cementing its status as one of the most valuable private companies in the world. SoftBank Group is in talks to lead a funding round of up to $40 billion in OpenAI at a valuation of $300 billion, including the new funds, Reuters reported in January.

Aside from any antitrust implications, a deal this size would need Musk and his consortium to raise enormous funds.

Musk’s stock in Tesla is valued at roughly $165 billion, according to LSEG data, but his leverage with banks is likely to be thin after his $44 billion buyout of what was then called Twitter in 2022.

To finance such a bid, Musk could sell part of his stake in Tesla or take a loan against his stake, or use his stake in rocket company SpaceX that is worth tens of billions of dollars as collateral, according to an uninvolved investment banker, who requested anonymity.

Gil Luria, analyst at D.A. Davidson told Reuters, “Musk’s offer to buy OpenAI’s nonprofit should significantly complicate OpenAI’s current fundraising and the process of converting into a for-profit corporation. The offer seems to be backed by more credible investors … OpenAI may not be able to ignore it. It will be the fiduciary responsibility of OpenAI’s board to decide whether this is a better offer, which could call into question the offer from SoftBank.”

(With inputs from Reuters)