Elon Musk has escalated his legal battle against OpenAI, filing a preliminary injunction in federal court to halt the company’s transition into a fully for-profit business. The motion also seeks to block OpenAI from allegedly requiring its investors to refrain from funding competitors, including Musk’s AI startup, xAI.
The injunction, filed Friday by Musk’s attorneys, marks the latest development in a high-stakes conflict involving OpenAI, its CEO Sam Altman, and major stakeholders such as Microsoft and tech investor Reid Hoffman.
Musk originally sued OpenAI in March 2024 in a San Francisco state court, accusing the company of violating federal racketeering (RICO) laws. The lawsuit was later withdrawn and refiled in federal court, with additional claims in November alleging that OpenAI and Microsoft violated antitrust laws by pressuring investors to avoid backing rival companies, including xAI.
The filing states that OpenAI’s alleged practices amount to a “group boycott” that restricts competitors’ access to crucial investment capital. Musk’s attorneys wrote:
“Microsoft and OpenAI now seek to cement this dominance by cutting off competitors’ access to investment capital while continuing to benefit from shared competitively sensitive information during generative AI’s formative years.”
Musk’s legal team further accused OpenAI of becoming a “Frankenstein,” exploiting both non-profit and for-profit structures to maximize financial gain.
An OpenAI spokesperson dismissed Musk’s allegations as baseless:
“Elon’s fourth attempt, which again recycles the same baseless complaints, continues to be utterly without merit.”
Microsoft, which has invested nearly $14 billion in OpenAI, declined to comment. In July, Microsoft relinquished its observer seat on OpenAI’s board but remains a major player in the generative AI market.
Founded as a non-profit in 2015, OpenAI transitioned to a capped-profit model in 2019. It is now restructuring into a fully for-profit public benefit corporation, a move intended to attract more investors while maintaining a separate non-profit governing entity. The transition has fueled concerns about the consolidation of power in the AI industry.
In October, OpenAI closed a major funding round valuing the company at $157 billion. The round, led by Thrive Capital, included investments from Microsoft and Nvidia. However, OpenAI faces mounting competition from rivals like xAI, Anthropic, and Google, as the generative AI market is projected to surpass $1 trillion in revenue within a decade.
The Federal Trade Commission (FTC) has been closely monitoring the partnerships and investments between AI developers and major cloud providers. FTC Chair Lina Khan launched a market inquiry earlier this year, with companies such as OpenAI, Microsoft, Amazon, and Google under scrutiny for potential anti-competitive practices.
Musk’s filing echoes these concerns, alleging that OpenAI’s practices undermine market fairness and stifle innovation. His attorneys argued that OpenAI should be barred from benefiting from what they termed “wrongfully obtained competitively sensitive information or coordination via the Microsoft-OpenAI board interlocks.”
Since Musk launched xAI in July 2023, the company has developed its Grok chatbot and raised significant capital, including a $6 billion funding round at a $50 billion valuation. Much of this funding is being used to acquire 100,000 Nvidia chips to support xAI’s AI operations.
The legal battle highlights the growing tension between leading players in the AI industry, which has seen an explosion in investment and competition. Business spending on generative AI surged 500% in 2024, according to Menlo Ventures, underscoring the high stakes for dominance in this emerging field.
The outcome of Musk’s legal challenge could set a precedent for how companies navigate the complex intersection of non-profit ideals, for-profit ambitions, and antitrust laws in the rapidly evolving AI landscape.
