Could Musk damage OpenAI even if his $100bn bid for it fails?

According to reports, the OpenAI board of directors formally rejected Elon Musk's nearly $100 billion acquisition offer, which aimed to acquire the company known for its ChatGPT artificial intelligence tool. Despite the rejection, experts believe that the proactively proposed acquisition may not be a complete failure, at least as far as Musk is concerned. This move has ignited discussions about the future direction of OpenAI and its commitment to open-source AI development.

Analysts point out that Musk's acquisition offer may complicate OpenAI CEO Sam Altman's plans to transform the company from a non-profit controlled entity into a for-profit one. In an interview with the BBC, Johnny Penn, an associate professor at the University of Cambridge, stated that Musk's actions were "basically trying to stymie OpenAI's growth trajectory." The potential shift in OpenAI's structure raises questions about the balance between innovation and commercial interests in the AI industry.

Last week, Musk, along with a consortium of investors including Hollywood super-agent Ari Emanuel, proposed an offer to acquire all of OpenAI's assets for $97.4 billion (£78.4 billion). While a significant amount, it is still lower than the $157 billion valuation the company received in a funding round four months ago, and far below the $300 billion current value some believe it holds. The valuation discrepancy highlights the dynamic and rapidly evolving landscape of AI companies.

OpenAI's unique organizational structure further complicates matters, involving collaboration between non-profit and for-profit sectors. It is understood that Altman wants to change this structure, shedding its non-profit board. Dr. Penn stated that this involves certain costs, and Musk appears to be trying to inflate those costs. "What Musk is trying to do is increase the perceived value of the OpenAI non-profit, so that OpenAI has to pay more to get out of its obligations to its own non-profit." This strategic maneuver could potentially reshape the governance and financial landscape of OpenAI.

Lutz Finger, a senior lecturer at Cornell University and the founder and CEO of AI startup R2Decide, said that by making an acquisition offer, Musk is effectively pricing OpenAI's non-profit assets. "By Musk putting a price tag on the non-profit part, he is making it much more expensive for Altman to spin it out," Finger told the BBC, "It's that simple." Musk claims his actions are aimed at returning OpenAI to its non-profit nature and its original mission of developing AI for the benefit of humanity. His public stance emphasizes the importance of ethical considerations in AI development.

However, some argue that Musk's motives are not so noble and are related to his own AI company, xAI, and its chatbot Grok, which has yet to receive positive public feedback. Finger stated, "Musk has in some ways missed the AI wave. He is behind and has tried to catch up many times." Finger believes that Musk is now trying to weaken his most powerful competitor. This perspective suggests a competitive rivalry driving Musk's actions in the AI domain.

Altman mocked Musk's acquisition offer on X, and Musk retaliated by calling his former partner a "liar," seemingly exacerbating their already strained relationship. Altman then fired back in an interview with Bloomberg, stating that Musk is not a "happy person" and that his decisions are driven by "insecurity." The escalating tensions between the two tech leaders underscore the high stakes and personal dynamics involved in the AI industry.

The war of words has also spilled over into the courtroom. U.S. District Judge Yvonne Gonzalez Rogers is hearing Musk's request for an injunction to block OpenAI's planned transformation. Musk claims that he will suffer irreparable harm without her intervention. Gonzalez Rogers stated at a "Musk v. Altman" hearing in Oakland, California, earlier this month: "What Musk says is true, it is not impossible. We will find out. He will be sitting in the witness box." The legal battle adds another layer of complexity to the ongoing saga surrounding OpenAI's future.

OpenAI's lawyers stated that Musk's recent acquisition offer contradicts his earlier claims that OpenAI's assets cannot be transferred for "private benefit." "Outside of court, these restrictions apparently do not apply, as long as the buyer is Musk and his allies," their response brief stated. This legal argument challenges the consistency and validity of Musk's claims regarding OpenAI's governance and purpose.

Some observers believe that reaching an agreement was never Musk's goal. Carl Freund, founder and chief analyst at Cambrian-AI, stated, "I think he just wants to create noise, news, and panic." But in addition to causing trouble for his old rival, this strategy could cause lasting damage to Musk's own reputation. "He's brilliant. He's created incredible companies that are doing incredible things. But his personal agenda is causing people to question his motives," Freund said. The long-term implications of Musk's actions on his reputation and influence in the tech world remain to be seen.