OpenAI, Founded as a Nonprofit Lab Ten Years Ago, Now Pits Musk Against Altman

On Dec. 11, 2015, OpenAI debuted as a nonprofit research lab after Elon Musk and a cadre of tech heavy‑hitters—including Peter Thiel and Reid Hoffman—committed $1 billion to create artificial intelligence that would serve humanity. The original charter emphasized independence from commercial pressures.

A decade later, the founding mission is all but a footnote.

Musk, now the world’s richest person, has moved on to launch rival AI startup xAI and is locked in a bitter legal and public‑relations fight with OpenAI CEO Sam Altman.

OpenAI has transformed into one of the fastest‑growing commercial entities on the planet. Since the launch of ChatGPT three years ago, the company’s private valuation has surged to roughly $500 billion, and more than 800 million users interact with its chatbot weekly.

xAI, by contrast, is expected to close a $15 billion funding round at a $230 billion pre‑money valuation, according to sources familiar with the deal.

Together with Google, Anthropic and Meta, OpenAI and xAI dominate a wave of capital pouring into AI models that are expanding beyond text chat to video generation, high‑compute content creation, and agentic AI that enterprises can customize for productivity gains.

OpenAI’s infrastructure bill is staggering: analysts estimate $1.4 trillion in spend on data centers and high‑performance chips to meet what the company describes as “insatiable demand.” The firm is effectively a cash‑burning machine taking on the tech megacaps and their chip suppliers, echoing earlier high‑growth tech waves that required years of deep‑pocketed investment to challenge entrenched incumbents.

“OpenAI has a very big role in the history of AI development, and will forever have that role,” said Gil Luria, an equity analyst at D.A. Davidson. “Whether that role resembles Netscape’s fleeting dominance or Google’s lasting impact remains to be seen.”

It is hard to imagine that just a few years earlier, Nvidia’s Jensen Huang was hauling a $300,000 DGX‑1 supercomputer to OpenAI’s Mission District office. The machine, which cost Nvidia “a few billion dollars” to develop, had no other buyer at the time; Musk was the sole early adopter.

Behind the nonprofit façade, tensions were already surfacing. In 2017, Musk warned co‑founders that he would cease funding if OpenAI drifted toward a profit‑driven model. Altman replied the next morning that he remained “enthusiastic about the nonprofit structure.”

In February 2018, Musk departed the OpenAI board, citing a potential conflict of interest with Tesla’s own AI ambitions. The split soon turned litigious.

Early in 2024, Musk sued OpenAI and Altman, alleging they abandoned the original humanitarian mission and grew too close to Microsoft, OpenAI’s primary backer. He also attempted to block a for‑profit conversion and, earlier this year, tried to acquire the lab for $97.4 billion.

In October, OpenAI completed a recapitalization that cemented its structure as a nonprofit with a controlling stake in a for‑profit subsidiary, now organized as OpenAI Group PBC.

Musk is not the only early OpenAI alum turned rival. In late 2020, Dario and Daniela Amodei left to form Anthropic, which recently secured a funding round that could value the company at up to $350 billion. Anthropic’s Claude family of large‑language models directly competes with OpenAI’s GPT series.

Altman is betting on scale. While OpenAI envisions a trillion‑dollar infrastructure outlay, Anthropic has pledged roughly $100 billion in compute over the next few years. Both bets hinge on the assumption that demand for AI services will continue accelerating.

“We’ve got all the various AI vendors making these huge capital investments,” said David Menninger, executive director of software research at ISG. “The question is how long those investments continue and whether they all pan out.”

Luria acknowledges that Anthropic’s commitments are grounded in its current growth trajectory, but he characterizes OpenAI’s spending plan as “fantastical” and “based on a faint belief those numbers are even possible.”

During a recent interview, Altman said OpenAI is already seeing enough demand to justify its aggressive spend, giving the company confidence that it can “significantly ramp revenue.”

He noted that the market’s appetite for AI is “pretty extreme” and projected annualized revenue of $20 billion by year‑end, with “hundreds of billions” by 2030.

Major tech partners have already locked in multi‑year contracts. Oracle signed a roughly $500 billion five‑year agreement to provide infrastructure services to OpenAI. Chipmakers AMD and Broadcom have woven OpenAI‑linked demand into their forecasts.

Nevertheless, Oracle’s shares fell 11 % after a weaker‑than‑expected earnings report, sparking concerns about the software vendor’s debt load as it expands its AI‑related data‑center capacity.

Venture capitalist Matt Murphy of Menlo Ventures called the current wave “the mother of all waves,” noting that the convergence of AI models, custom chips, and hyperscale data centers could generate trillion‑dollar outcomes—explaining the unprecedented capital expenditures and lofty valuations.

Altman recently declared a “code red” inside OpenAI, reallocating resources to accelerate ChatGPT’s speed, reliability and personalization while postponing work on ads, health‑care, shopping agents and a personal‑assistant project called Pulse. The move followed Google’s launch of the Gemini 3 model, which intensified competition.

On Thursday, OpenAI unveiled ChatGPT‑5.2, a faster, more capable reasoning model that the company touts as its best system yet for professional use. The same day, OpenAI struck a three‑year, $1 billion content and equity deal with Disney around the Sora AI video generator.

When asked about the Google threat, Altman downplayed its impact, saying Gemini had “less of an impact on our metrics than we initially feared.” He added that OpenAI expects to exit “code red” by January.

— Kif Leswing contributed to this report.