Elon Musk Wants OpenAI For $97B, Altman Says 'No Thanks'

The Wall Street Journal reported first that Musk and a group of investors offered to buy the nonprofit that controls OpenAI on Monday. This unexpected bid is a speedbump in Altman’s plans to turn OpenAI into a for-profit company and spend up to US$ 500 billion on AI infrastructure through a project called Stargate, jointly with the US government and SoftBank. 

The offer could also make things even more complicated for OpenAI, as it attempts to complete a US$ 40 billion fund-raising deal that would nearly double the company’s valuation from US$ 157 billion (as valued in October 2024) to about US$ 300 billion.

Musk's offer is targeting a major weak spot in OpenAI’s structure: The nonprofit board that legally controls the entire company.

To fully separate from the nonprofit, OpenAI’s for-profit arm may need to compensate it, either with a payout or a minority stake, reported The New York Times. While OpenAI itself has thousands of employees, the nonprofit has just two staff members and US$ 22 million in assets. But it holds the real power.

Musk’s offer forces OpenAI to put a price on the nonprofit’s control, potentially making it more expensive for Altman to turn OpenAI into a for-profit company. If the nonprofit sells for less than Musk's offer, it could face legal scrutiny for not getting the best deal.

When Altman rejected the deal via X today, Musk responded and called him a ‘swindler.’

However, buying out his competitors is not exactly new to Musk. He did it first at Tesla, which was founded by Martin Eberhard and Marc Tarpenning in 2003. Musk was an early investor and a board member in Tesla, and eventually pushed out the original founders to take over as CEO.

About two decades later, Musk bought X (when it was called Twitter) in 2022, and fired its CEO and other top executives. Therefore, Musk's bid to acquire a company competing with his own isn't new strategy.

Musk & Altman: Not A Love Affair

Musk and Altman’s connection isn’t restricted to competition between their AI companies. Their relationship dates back to 2015, when ChatGPT was founded with Musk as one of its founders. He reportedly donated over US$ 44 million between 2016 and 2019.

Musk parted with OpenAI in 2019 due to “a potential future conflict”, as Tesla increasingly focused on AI as it explored autonomous driving. 

However, OpenAI's account of the situation suggests a more contentious departure. They stated that Musk left after his attempts to acquire over 50 per cent equity and secure the role of CEO at a for-profit OpenAI, or to merge the company with Tesla, didn’t work out.

The non-bonhomie continued when Altman was fired as CEO of OpenAI in late 2023, and Musk defended OpenAI's chief scientist Ilya Sutskever, who was the key person in Altman’s ousting. Musk said that Sutskever has a good "moral compass" and does not seek power.

In March 2024, Musk sued OpenAI, accusing it of abandoning its original mission to develop AI for the public good. He argued that OpenAI’s 2023 partnership with Microsoft betrayed its founding principles, shifting its focus from benefiting humanity to making money, and effectively turning it into a “de-facto subsidiary” of Microsoft. 

Musk later withdrew the lawsuit, but refiled it in August with additional accusations. In response, OpenAI released emails suggesting Musk had previously supported the company's shift toward raising funds and limiting open-source releases. 

Critics argue that Musk’s lawsuit is weak, with some legal experts calling his claims “illusory promises” that aren’t enforceable in court.

Musk’s offer to buy out OpenAI comes at a time when he is personally overseeing a complete AI overhaul of several US government agencies under the Department of Government Efficiency (DOGE), which he heads.

DOGE is reportedly using AI to dig through the US Education Department’s finances. They’re analysing everything, from grants to travel expenses, using Microsoft’s cloud. 

The AI is even processing sensitive information, like financial records and personal details of grant managers. Lower-level staff were told to hand over access. It’s all part of Musk’s push to downsize the government, with his team of ex-Tesla and SpaceX folks leading the charge.

Another point of contention between Altman and Musk may be that Altman has maneuvered his way into Trump’s AI agenda. Days before, he pitched Stargate and framed it as being essential for beating China in the AI race. 

Musk, a major Trump donor, publicly attacked the project. With his offer to buy out OpenAI, Musk may now be shifting his strategy: Why challenge the competition when you can simply acquire it and dismantle it from within?