According to a report in The Wall Street Journal, a consortium of investors led by Elon Musk is offering to buy the nonprofit that controls privately held artificial intelligence (AI) start-up OpenAI for $97.4 billion.
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Musk’s attorney, Marc Toberoff, has reportedly confirmed that he submitted the bid to OpenAI’s board of directors on Feb. 10. The unsolicited offer complicates OpenAI CEO Sam Altman’s efforts to convert the start-up company into a for-profit business model and spend up to $500 billion on AI infrastructure. At the same time, Altman and Musk are battling in the courts over the future of OpenAI.
The Journal quotes Musk lawyer Toberoff as saying, “It’s time for OpenAI to return to the open-source, safety-focused force for good it once was.” The bid is being backed by Musk’s own artificial intelligence company xAI, which could merge with OpenAI following a deal being struck.
The bid is also backed by several firms, including Valor Equity Partners, Baron Capital, Atreides Management, Vy Capital and 8VC, a venture capital firm led by Palantir (PLTR) co-founder Joe Lonsdale. Ari Emanuel, CEO of Hollywood company Endeavor, is also backing the offer through his investment fund.
Past History
Altman and Musk co-founded OpenAI in 2015 as a charity. In 2019, after Musk left the company and Altman became CEO, OpenAI created a for-profit subsidiary that has served as a vehicle for it to raise money from Microsoft (MSFT) and other investors.
Altman is now in the process of turning the subsidiary into a traditional company and spinning out the nonprofit, which would own equity in the new for-profit. OpenAI has pledged to complete the for-profit transition by late 2026. In a funding round last October, OpenAI was valued at $157 billion.
In recent months, Musk has filed a series of lawsuits accusing OpenAI of betraying its original nonprofit mission by creating a for-profit arm and colluding with its largest investor, Microsoft, to dominate the development of AI. OpenAI has called Musk’s legal claims baseless and overreaching.
Is MSFT Stock a Buy?
As neither OpenAI or xAI are publicly traded, we look instead at the stock of Microsoft, which is the largest investors in OpenAI. MSFT stock has a consensus Strong Buy rating among 32 Wall Street analysts. That rating is based on 29 Buy and three Hold recommendations issued in the last three months. The average price target on MSFT stock of $510.90 implies 24.18% upside from current levels.
