ChatGPT parent OpenAI is exploring restructuring its corporate framework in 2025, transforming it into a Delaware Public Benefit Corporation (PBC).
Sam Altman's artificial intelligence company initially focused on advancing AI without financial constraints. However, by 2019, it became clear that developing large-scale language models required substantial investments, prompting the company to introduce a hybrid structure.
OpenAI raised $1 billion from Microsoft Corp (NASDAQ:MSFT). The company highlighted the need for "hundreds of billions of dollars" in capital to sustain its mission.
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The current valuation of $157 billion and competition from Microsoft, Alphabet Inc (NASDAQ:GOOGL) (NASDAQ:GOOG), and Anthropic, prompted OpenAI to issue traditional equity through its new structure, CNBC reports.
Transitioning to a PBC will allow OpenAI to attract conventional equity investments, while the nonprofit arm will focus on charitable initiatives in education, healthcare, and science.
Under the proposed model, OpenAI's nonprofit will hold a significant interest in the for-profit PBC, valued by independent financial advisors.
However, OpenAI's move has sparked opposition from co-founder Elon Musk, who has filed legal challenges against the restructuring.
Musk, owner of OpenAI's rival xAI, charged OpenAI of ditching its nonprofit roots. Internal challenges have also emerged, with key executives like Chief Technology Officer Mira Murati and Research Chief Bob McGrew exiting the company.
Developing and scaling generative AI models like ChatGPT requires massive resources, including high-powered processors from Nvidia Corp (NASDAQ:NVDA) and cloud infrastructure provided by key backer Microsoft. OpenAI expects $5 billion in losses on $3.7 billion in revenue in 2024.
Interestingly, OpenAI recently revealed old emails from Musk that depicted his advocacy for a profit-making business model.
Musk's AI company, xAI, announced on Monday that it raised $6 billion in funding, marking its second major funding round in 2024.
The investment features strategic backing from Nvidia Corp (NASDAQ:NVDA) and Advanced Micro Devices, Inc (NASDAQ:AMD).
xAI plans to use the funding to expand its Colossus supercomputer, which currently runs on 100,000 Nvidia Hopper GPUs. The company aims to double its capacity to 200,000 GPUs.
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