The legal battle between Elon Musk and OpenAI's Sam Altman is heating up in federal court in Oakland, California. Musk claims OpenAI, Altman, and president Greg Brockman broke a promise to keep the AI research organization as a permanent nonprofit, and he's seeking $134 billion in damages.
OpenAI was founded in 2015 by Musk and Altman, with the idea of countering giants like Google and developing powerful AI for the benefit of humanity — not for one company's profit. According to the New York Times, Altman pitched an "AI Manhattan Project" to Musk in May 2015, proposing a research lab that would share its breakthroughs with the world through some kind of nonprofit entity.
But by 2017, tensions grew inside OpenAI. Some argued that open-sourcing cutting-edge AI was dangerous. At the same time, there was a growing fear that a nonprofit structure simply couldn't raise the billions needed to build artificial general intelligence (AGI) on par with human cognition.
The rift between Musk and OpenAI came to a head in 2018. Musk wanted to fold OpenAI into Tesla, using the automaker's supercomputer to build AI. But when Altman and others refused to hand Musk operating control, he walked away and cut off funding. As Sam Altman later recounted, the real breaking point came when Musk demanded absolute control.
After that, Altman restructured OpenAI as a for-profit subsidiary under the nonprofit parent. That move unlocked a $13 billion investment from Microsoft and led to a more closed approach to sharing technology.
Musk's lawsuit argues that Altman and Brockman deliberately deceived him, promising a safer, more open path than the big tech companies, only to pursue profits. He says his donations were made based on those promises, and he wants the profits improperly taken by OpenAI's nonprofit arm returned.
OpenAI denies everything. It claims Musk himself tried to turn OpenAI into a commercial operation back in 2018, and points to a 2017 document where Musk's side apparently registered a company that looks like a for-profit version of OpenAI.
According to CNBC, OpenAI briefly considered a full transition to a for-profit company in 2024, separating the nonprofit's control. But after pressure from civic groups, former employees, and Musk himself, it reversed course and completed a recapitalization in October that cemented the nonprofit's controlling stake in the for-profit business.
The trial will involve Musk, Altman, Brockman, and Microsoft CEO Satya Nadella as witnesses. The proceedings are split into two phases: first, a jury of nine will give an advisory verdict on liability, and then a judge will decide on damages and remedies.
This isn't just a personal feud — it has implications for the entire AI race. OpenAI is eyeing an IPO and has listed the lawsuit as a business risk in investor materials. Meanwhile, Musk has launched his own rival AI company, xAI, and merged it with SpaceX. The fight over AI dominance, funding, and governance is now playing out in a courtroom.