The $157 billion artificial intelligence company intends to maintain a nonprofit subsidiary to further its mission of benevolent AI development.
OpenAI, the developer of ChatGPT, is purportedly in the early stages of discussions with regulators in California and Delaware to convert the organization into a for-profit entity.
Bloomberg, citing sources familiar with the matter, reports that the company, which is presently valued at $157 billion, has initiated communication with the offices of Attorney General Rob Bonta in California and his counterpart in Delaware.
In September, Reuters reported that OpenAI was developing a strategy to transform its primary business into a for-profit entity that would be free from the oversight of its nonprofit board.
Investors are more attracted to a simplified for-profit structure than a nonprofit research organization. However, the valuation of OpenAI’s intellectual property, which encompasses the highly profitable large language model chatbot, remains a significant obstacle in the discussions.
The process may be intricate due to California law, which mandates that the value of nonprofit assets be allocated to a charitable cause. However, OpenAI’s primary assets are its intellectual property.
The transformation could also prompt inquiries regarding the company’s ability to maintain its original benevolent public mission of developing AI products that are both secure and advantageous to humanity, following its establishment in 2015.
In May 2023, tech magnate Elon Musk expressed concerns regarding the legality of the transition to for-profit status in the wake of a $50 million investment in the company.
He said at the time that “OpenAI had transformed from an open-source, nonprofit organization meant to compete with Google into a closed-source, for-profit behemoth owned by Microsoft.”
Musk claimed that OpenAI and CEO Sam Altman violated his contract in February 2024; however, he withdrew the lawsuit in June.
Bret Taylor, the chairperson of the OpenAI nonprofit board, stated in a statement to Bloomberg that the nonprofit would persist in its operations as part of any new corporate structure. He also stated that:
“The charity would be able to continue existing and thriving in any possible reorganization, and it would get full compensation for its present interest in the OpenAI for-profit, allowing it to better carry out its objective.”
According to a spokesperson for Bonta’s office, the organization is “dedicated to safeguarding charitable assets for their intended benefit.”
Subsequently, there was a period of instability, which culminated in the brief dismissal and subsequent rehiring of CEO Sam Altman. The nonprofit board experienced a rise in tension as it attempted to balance the pressure to commercialize AI with the importance of AI safety.
Miles Brundage, a seasoned safety researcher at OpenAI, resigned from the company on October 23. He stated that he intended to establish a new nonprofit organization or collaborate with an existing one to conduct research and advocacy on AI policy.
OpenAI reported in early October that it was unlikely to achieve profitability until 2029, following its $100 billion revenue milestone. Projections indicated that it would experience a loss of approximately $5 billion in 2024.
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