OpenAI started as a nonprofit lab 10 years ago. Musk and Altman are rivals

OpenAI was launched as a nonprofit research organization on December 11, 2015, after Elon Musk and a group of prominent technologists, including Peter Thiel and Reid Hoffman, pledged $1 billion to develop artificial intelligence for the benefit of humanity. The idea was that the project would be free from commercial pressures and the pursuit of money.

Ten years later, its founding mission has been largely forgotten.

Musk, currently the world’s richest man, has long since founded rival startup xAI. And he’s engaged in a bitter legal and public relations battle with OpenAI CEO and co-founder Sam Altman.

Far from the nonprofit realm, OpenAI has emerged as one of the fastest-growing for-profit organizations on the planet, with a private market valuation of $500 billion, almost all of which has been accumulated since the company launched ChatGPT three years ago. Over 800 million people now use chatbots every week.

Meanwhile, Musk’s xAI is on track to close a $15 billion round this month at a pre-money valuation of $230 billion, people familiar with the matter told CNBC’s David Faber in late November.

OpenAI and xAI are googlewith humanity metaLarge companies are pouring money into AI models as the market rapidly evolves from text-based chatbots to AI-generated video and more advanced compute-intensive content to agent AI, customizing tools to increase productivity.

In the case of OpenAI, the price tag is almost incomprehensible. 1.4 trillion and growing. This is primarily for the huge data centers and high-performance chips needed to meet the insatiable demand for the company’s technology. For now, OpenAI is a money-making machine that takes on tech giants and their chip suppliers, drawing comparisons to earlier high-growth tech companies that spent years and millions of dollars trying to compete with giant incumbents, with mixed results.

DA Davidson equity analyst Gil Luria said in an interview that “OpenAI has played a huge role in the history of the development of artificial intelligence and will forever continue to play that role.” “Now, is that role going to be Netscape or Google? We don’t know yet.”

It’s a position I couldn’t have imagined in 2016. Nvidia CEO Jensen Huang hauled the black DGX-1 supercomputer to OpenAI’s offices in San Francisco’s Mission District. The $300,000 machine cost Nvidia “billions of dollars” to develop, but there were no other buyers, Huang recently recalled on Joe Rogan’s podcast.

Only OpenAI’s Musk wanted it.

When Mr. Musk told him it was for a “non-profit company,” Mr. Huang said his face flushed at the thought of parking such an expensive box inside an organization that wasn’t trying to make money.

But behind the scenes, the nonprofit ideal was already under intense strain, and Mr. Musk didn’t like what he saw.

“We’ve had enough, everyone. This is the last straw,” Musk wrote in an email to his co-founders in 2017, warning that he would “no longer fund” OpenAI if it became a tech startup rather than a nonprofit. Altman responded the next morning: “I remain passionate about nonprofit organizations!”

Musk resigned from the OpenAI board in February of the following year, a move he said at the time was to avoid potential conflicts of interest with his car company. teslaa deeper dive into AI.

The story was even more complicated.

Musk sued OpenAI and Altman in early 2024, claiming that both companies had abandoned the company’s founding mission of developing AI “for the benefit of humanity at large,” and Musk has regularly criticized OpenAI and Altman’s close relationship. microsoftits major patron. He has also gone to court to prevent OpenAI from turning into a commercial company and even tried to buy AI Labs for $97.4 billion earlier this year.

In October, OpenAI announced that it had completed a capital reorganization, strengthening its position as a nonprofit organization with control of its for-profit businesses. Currently, it is a public interest corporation called OpenAI Group PBC.

Musk isn’t the only early OpenAI team member to become a rival. Brothers Dario and Daniela Amodei left OpenAI at the end of 2020 to found Anthropic, and announced last month that Microsoft and Nvidia would invest in the company. The valuation from this funding round could reach $350 billion.

Anthropic’s Claude family of large-scale language models is one of the biggest competitors to OpenAI’s GPT models.

Altman is betting that he can win the race by outspending his competitors. His company has drawn plans for more than $1 trillion in AI infrastructure spending, while Anthropic has made about $100 billion in recent compute commitments that will be made at various intervals over the next few years.

All of this represents a big bet that demand for AI services will continue to grow rapidly.

“Different AI vendors are making huge capital investments,” said David Menninger, executive director of software research at ISG. “There are questions about how long these capital investments will last and whether everything will work out.”

Luria said Anthropic and others are making reasonable commitments based on their current growth trajectory and the funding they’ve already secured. But he said OpenAI’s approach is based on “a series of great promises” with “a glimmer of faith that these numbers are achievable.”

Altman said in an interview with CNBC on Thursday that OpenAI has already seen enough demand to justify its spending plans and is therefore “confident we can significantly increase our revenue.”

“Growing this fast at this kind of scale is obviously unusual, but the data we have right now shows us this,” Altman said, adding, “The market demand is pretty extreme.”

Altman said last month that he expects annual sales to reach $20 billion by the end of this year and hundreds of billions by 2030. That historic pace of growth has been a huge boon for big technology companies.

oracle has signed a nearly $500 billion deal to sell infrastructure services to OpenAI over five years. chip manufacturer advanced micro device and broadcom has factored demand related to OpenAI into its multi-year forecast.

But Oracle’s stock plunged 11% on Thursday after the software vendor reported lower-than-expected earnings, weighing down Nvidia, Coreweave and other AI stocks. Investors have grown concerned about Oracle’s debt burden fueling its growth, even as long-term contract commitments from companies like OpenAI, Meta and Nvidia have surged.

Still, Matt Murphy, a venture capitalist at Menlo Ventures, said that in his 25 years in the venture business, “this is the mother of all waves.”

Murphy, an early investor in Anthropic, said the combination of AI models, custom chips and hyperscale data centers could lead to trillion-dollar outcomes. That explains the eye-popping levels of capital expenditures and astronomical valuations, he said.

Altman recently declared a “Code Red” within the company, realigning resources to focus on making ChatGPT faster, more reliable, and more personal, slowing work on advertising, health, shopping agents, and a personal assistant called Pulse. His declaration comes after Google released its Gemini 3 model last month, further accelerating the search giant’s rise in the market.

On Thursday, OpenAI announced ChatGPT-5.2. ChatGPT-5.2 is a faster and more capable inference model that the company says is the perfect system for everyday business use. It also signed a three-year, $1 billion content and capital agreement. disney Around the Sora AI video generator.

Altman downplayed the threat from Google, telling CNBC that Gemini’s impact on the company’s metrics was less than OpenAI initially feared.

“When a competitive threat arises, you want to focus on it and respond quickly,” Altman said.

He said he expects the company to end Code Red by January.

—CNBC’s Kif Leswing contributed to this report.