The ongoing legal contest between Elon Musk and OpenAI has taken a new turn as Musk intensifies his legal moves. Submitting a preliminary injunction on November 30 alongside xAI, his artificial intelligence venture, and former OpenAI board member Shivon Zilis, Musk hopes to deter OpenAI from transforming into a solely profit-oriented entity. The motion accuses OpenAI of practicing anti-competitive behavior and breaching federal regulations. The injunction aims to prevent OpenAI from discouraging its financiers from funding rival entities like xAI.
The primary allegations against OpenAI concern convictions of disregarding antitrust laws by constricting investors from backing competitive businesses. OpenAI, in association with Microsoft, has been indicated for scheming a ‘group boycott’ aimed at draining pivotal investment support from competitors, chiefly xAI. This is further reinforced by advantageous insights derived from the interlocking of Microsoft and OpenAI boards. Reacting to these allegations, OpenAI has labeled Musk’s assertions as ‘unfounded’.
To provide some background, Musk initially sued OpenAI in March 2024 citing infringements of federal racketeering (RICO) regulations. The lawsuit was reissued in a federal court later. In the middle of November, the case saw an addition of antitrust allegations that revolve around Microsoft’s supposed conspiracy with OpenAI.
This intricate legal feud is developing at a time when OpenAI is enjoying an influential position in the artificial intelligence market, primarily driven by its product, ChatGPT. Following a recent funding campaign steered by Thrive Capital and featuring contributions from giants like Microsoft and Nvidia, OpenAI’s valuation catapulted to an astounding $157 billion.
Parallelly, Musk’s xAI, founded in July 2023, continues to delineate itself as a potent challenger. The company has achieved significant milestones with the introduction of its chatbot product Grok and procuring a $50 billion investment valuation. Aiming to boost its expansion, the company is planning to purchase 100,000 Nvidia chips.
In a related development, regulatory scrutiny of this sector has been steadily climbing. The Federal Trade Commission (FTC) has initiated a market investigation into partnerships between AI developers and cloud providers. The probe includes companies like OpenAI, Microsoft, Amazon, and Anthropic, reflecting the regulatory body’s growing focus on the sector’s competition strategies.
OpenAI was founded as a non-profit organization in 2015 but decided to transition to a capped-profit model four years later in 2019. The latest strategy charted by OpenAI involves transitioning into a wholly profit-driven public benefit company. The motive behind this restructuring revolves around attracting more investors while preserving a distinct non-profit division.
An anticipated surge in the generative AI market profits to the tune of $1 trillion over the next decade is motivating a fierce rivalry among startups and established firms. In this space of escalating competition, startups like xAI and Anthropic are vying for a substantial market presence against established industry players such as Google. This litigious strife instigated by Musk underscores the considerable stakes in this expeditiously expanding sector.