OpenAI Ties Up Loose Ends as Wall Street Awaits IPO

Sam Altman is suddenly being confronted by the ghosts of OpenAI’s past, present and future.

On Monday, jury selection began in Elon Musk’s civil suit against Altman, a court battle that could challenge OpenAI’s recent transformation into a for-profit entity and potentially oust Altman from his job. Meanwhile, the ChatGPT-maker on Monday also seriously redefined the terms of its ongoing relationship with Microsoft, while reports surfaced that OpenAI is partnering with chipmaker Qualcomm to develop the architecture for the smartphone it’s betting its future on. Critically, behind each headline looms the specter of OpenAI’s expected initial public offering.

Breaking Up Is Hard to Do

In OpenAI’s early days as a non-profit research lab, co-founder Musk footed much of the bill, providing some $38 million of seed money between 2016 and 2020, according to court documents. Then came infighting and a power struggle; emails from 2017 show that Musk’s funding became somewhat contingent on commitments that OpenAI would remain a non-profit (lest he be “a fool … essentially providing free funding” for others to build a startup) and that he be named CEO. 

By 2018, Musk officially left the company. A year later, Microsoft became the primary financial backer of OpenAI, investing $1 billion while becoming its exclusive cloud provider. In 2024, Musk filed a lawsuit against Altman, fellow company leaders and Microsoft, alleging they used his funds while betraying the original non-profit goal. He is seeking $150 billion in damages and wants OpenAI to revert to a non-profit with Altman removed from power.

For its part, OpenAI called the lawsuit “baseless” and a “jealous bid to derail a competitor” in a post Monday on X, Musk’s social media platform. In case you forgot, in 2023, Musk started the very much for-profit xAI, now a subsidiary of SpaceX.  

Microsoft, which has invested some $13 billion into the AI firm, had its own qualms about the for-profit transition. After a long legal battle, the Windows-maker last year secured some guarantees in OpenAI’s future, though a joint statement on Monday loosened some terms:

• OpenAI will now be able to sell its services and products across any cloud provider, not just Microsoft. Broader access has been a key selling point for rival Anthropic, and the amendment clears the way for a $50 billion investment by Amazon.
• In turn, Microsoft will stop paying a revenue share to OpenAI, while OpenAI’s revenue share to Microsoft will have new caps through 2030. Microsoft is retaining its 27% stake in the company.

Smartless: In the statement, the company said the agreement was designed to “simplify our partnership” and provide “flexibility.” OpenAI is already figuring out its future; a note from respected tech analyst Ming-Chi Kuo said the company is working with Qualcomm and MediaTek to develop the iPhone-killer that could replace traditional apps with AI agents. Shares of Qualcomm jumped about 1% on Monday, while Apple’s shares fell 1.2%.