Musk sues Altman over OpenAI's shift from nonprofit to for-profit
Elon Musk is demanding US$130 billion in damages and wants to unwind OpenAI's conversion to a for-profit company. The trial, which began this week in California, centers on whether Altman and OpenAI president Greg Brockman breached their founding agreement by transforming the nonprofit into a commercial enterprise now valued at roughly US$852 billion.
Musk cofounded OpenAI in 2015 and contributed about US$44 million in initial funding. He claims Altman and Brockman induced him to donate on the understanding that any artificial general intelligence built at OpenAI would remain open and shared with humanity. Instead, he argues, they converted the charity into what his lawyers call a "wealth machine."
The allegations
Musk is alleging breach of contract, breach of fiduciary duty, false advertising, and unfair business practices. His legal team argues that OpenAI's existing models already constitute AGI because they surpass human intelligence in many tasks. Under the founding agreement, AGI could not be commercially licensed - a restriction that would affect Microsoft's current license for CoPilot.
OpenAI rejects the narrative entirely. The company says Musk himself proposed merging OpenAI with Tesla in 2017 and walked away when denied majority control. OpenAI's lead counsel told jurors the lawsuit is "motivated by jealousy" and designed to damage a competitor.
OpenAI's precarious position
The trial arrives as OpenAI faces mounting pressure. The New Yorker recently published an investigation describing Altman as a "pathological liar," citing an internal dossier from former chief scientist Ilya Sutskever that alleged a "consistent pattern of lying" to the board.
Financially, the company is bleeding. Internal projections show roughly US$14 billion in losses for 2026 alone, with cumulative losses expected to exceed US$44 billion before any profit materializes. Shortly before trial began, OpenAI shut down Sora, its video-generation model, which burned approximately US$1 million daily in computing costs and took down a US$1 billion Disney partnership with it.
A fresh US$122 billion fundraise from Amazon, Nvidia, and SoftBank has not eased the pressure.
What a Musk victory would mean
If Musk prevails, the consequences would reshape the AI industry. OpenAI's planned initial public offering - expected in late 2026 at a US$1 trillion valuation - would almost certainly be derailed. Investors in the recent funding round could face clawbacks.
Altman, who has led the company since 2019, could be removed. The broader question of whether AI labs founded as charities can lawfully pivot into commercial enterprises would be settled, at least in California. This has implications for Anthropic and other mission-driven competitors.
Even a defeat for Musk would not end the controversy. The trial has already exposed internal documents - diaries, Slack threads, HR memos - that paint an unflattering portrait of OpenAI's governance.
What this means for AI governance
The case surfaces a wider concern: an extremely powerful technology is being built and controlled by a small number of competing executives. The outcome could establish legal precedent for how AI companies structure themselves and who controls their direction.
For legal professionals, the trial raises questions about corporate governance in high-stakes AI ventures, the enforceability of founding agreements when companies pivot their business models, and fiduciary duties in rapidly evolving tech sectors. Learn more about AI for Legal and AI for Executives & Strategy to understand how these issues affect your practice.
The trial is expected to last roughly three weeks, but its effects will likely extend far longer.
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