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Read more After a yearslong legal feud, Elon Musk and OpenAI CEO Sam Altman are heading to trial this week in Northern California in a case that could have sweeping consequences. Ahead of OpenAI’s highly anticipated IPO, the court could rule on whether the company is allowed to exist as a for-profit enterprise and might even oust its current executive leadership, including Altman.
Musk is suing OpenAI, alleging that Altman and OpenAI president Greg Brockman deceived him into bankrolling the company in its early days by promising to maintain it as a nonprofit dedicated to developing AI that benefits humanity, only to later restructure the company to operate a for-profit subsidiary. Musk cofounded OpenAI with Altman and others in 2015, but he left in 2018 after a bitter power struggle.
Musk is seeking as much as $134 billion in damages from OpenAI and Microsoft, one of OpenAI’s biggest financial backers. He is also asking the court to remove Altman and Brockman from their roles and to restore OpenAI as a nonprofit. Musk has asked the court to award any damages to OpenAI’s nonprofit rather than to him personally.
Nine jurors will deliver an advisory verdict, a non-binding recommendation, to guide the judge in deciding Musk’s claims against Altman. Musk, Altman, and Brockman will take the stand. Former OpenAI chief scientist Ilya Sutskever, former OpenAI CTO Mira Murati, and Microsoft CEO Satya Nadella are also expected to testify. Cringey texts, raw diary entries, and endless scheming behind the founding and growth of OpenAI are expected to come to light.
In an industry enveloped in secrecy, the trial will be a rare opportunity for the public to look behind the curtain and find out what’s going on in the companies creating the most transformative technology ever built.
What are they fighting about?
When OpenAI was originally founded as a nonprofit, backed by a $38 million donation from Musk, the company vowed to create open-source technology for the public’s benefit, unconstrained by a need to generate financial returns. But over the years, the company began to claim that intensifying competition could make it dangerous to share how it develops its AI models and that a nonprofit structure could not raise enough money to keep building AI. (MIT Technology Review was first to report on OpenAI’s internal conflicts around its mission.)
The court has already found that in 2017 Altman and Brockman wanted to establish a for-profit arm, while Musk proposed merging OpenAI with his electric-car company, Tesla. When Musk threatened to stop funding, Altman and Brockman told him that they were committed to keeping the company a nonprofit. Musk alleges that they pursued plans to pivot to a for-profit without informing him. According to OpenAI, Musk agreed that the company needed a for-profit entity and even wanted to be its CEO.
But even if Musk proves he was duped by Altman and Brockman, he may not have standing in the first place to sue them for restructuring the company to operate a for-profit subsidiary. Some legal scholars are puzzled over why the judge allowed him to bring this claim. “The idea that Elon Musk can sue because he was a donor or used to be on the board is pretty puzzling,” says Jill Horwitz, a law professor who studies nonprofit law at Northwestern University. “Typically, it’s up to the attorneys general to bring such a claim to enforce the charitable purposes. And that’s already happened.”
In October 2025, state attorneys general of California, where OpenAI is headquartered, and Delaware, where OpenAI is incorporated, struck a deal with OpenAI to approve its new corporate structure on a series of conditions. For example, a safety and security committee at the nonprofit would review safety-related decisions made by the for-profit subsidiary. Critics of the restructuring, including Musk, AI safety advocates, and civil society groups, have tried to stop it.
California’s attorney general has declined to join Musk’s lawsuit, saying that the office did not see how his action serves the public interest.
Still, whether the deal holds OpenAI to its nonprofit mission is an open question. “Elon Musk should have to show … what the deficiencies are in what’s been agreed to by OpenAI with the attorneys general,” says Rose Chan Loui, the director of the UCLA School of Law’s philanthropy and nonprofit program. Even with the terms in place, holding OpenAI to them depends on “how much they can enforce it and how much transparency they get into OpenAI’s work.”
More importantly, legal experts say the case is being considered under the wrong body of law. Musk argues that Altman and Brockman breached OpenAI’s charitable trust by creating a closed-source, for-profit subsidiary. As a result, the court has been analyzing the claim under the law of trusts. “But OpenAI is not a trust. OpenAI is a corporation. And so really they should be looking at … the law of charitable nonprofit organizations,” says Chan Loui.
What’s on the line?
Despite all the legal muddiness, the outcome of the trial could upend the AI race. Any one of the remedies that Musk seeks could cripple OpenAI as it races to go public by the end of the year. OpenAI, which is valued at over $850 billion, has described the litigation with Musk as a potential risk to its business. Musk’s rival company xAI, which makes the chatbot Grok, is expected to go public as a part of his rocket company SpaceX as early as June. If Musk prevails, xAI, which in combination with SpaceX is valued at $1.25 trillion, could get a big advantage in the AI race.
And the trial has helped expose the bitter schism between Musk and the company he once helped to found. An OpenAI spokesperson referred MIT Technology Review to a post on X: “This lawsuit has always been a baseless and jealous bid to derail a competitor.” Although Musk’s lawyers did not immediately respond to a request for comment, he has posted on X that “Scam Altman lies as easily as he breathes.”
MIT Technology Review will have ongoing coverage of Musk v. Altman until its conclusion. Follow @techreview or @michelletomkim on X for up-to-the-minute reporting.
This story originally appeared in The Algorithm, our weekly newsletter on AI. To get stories like this in your inbox first, sign up here.
In February, I picked up a flyer at an anti-AI march in London. I can’t say for sure whether or not its writers meant to riff on South Park’s underpants gnomes. But if they did, they nailed it: “Step 1: Grow a digital super mind,” it read. “Step 2: ? Step 3: ?”
Produced by Pause AI, an international activist group that co-organized the protest, it ended with this plea to the reader: “Pause AI until we know what the hell Step 2 is.”
In the South Park episode “Gnomes,” which first aired in 1998, Kenny, Kyle, Cartman, and Stan discover a community of gnomes that sneak out at night to steal underpants from dressers. Why? The gnomes present their pitch deck. “Phase 1: Collect underpants. Phase 2: ? Phase 3: Profit.”
The gnomes’ business plan has since become one of the greats among internet memes, used to satirize everything from startup strategies to policy proposals. Memelord in chief Elon Musk once invoked it in a talk about how he planned to fund a mission to Mars. Right now, it captures the state of AI. Companies have built the tech (Step 1) and promised transformation (Step 3). How they get there is still a big question mark.
As far as Pause AI is concerned, Step 2 must involve some kind of regulation. But exactly what it will call for and who will enforce it are up for debate.
AI boosters, on the other hand, are convinced that Step 3 is salvation and tend to glaze over the middle bit. They see us racing toward sunny uplands on the back of an “economically transformative technology,” as OpenAI’s chief scientist, Jakub Pachocki, put it to me a few weeks ago. They know where they want to go—more or less: It’s hazy up there and still some way off. But everyone’s taking a different route. Will they all make it? Will anyone?
For every big claim about the future, there is a more sober assessment of how the rubber meets the road—one that quells the hype. Consider two recent studies. One, from Anthropic, predicted what types of jobs are going to be most affected by LLMs. (A takeaway: Managers, architects, and people in the media should prepare for change; groundskeepers, construction workers, and those in hospitality, not so much.) But their predictions are really just guesses, based on what kinds of tasks LLMs seem to be good at rather than how they really perform in the workplace.
Another study, put out in February by researchers at Mercor, an AI hiring startup, tested several AI agents powered by top-tier models from OpenAI, Anthropic, and Google DeepMind on 480 workplace tasks frequently carried out by human bankers, consultants, and lawyers. Every agent they tested failed to complete most of its duties.
Why is there such wide disagreement? There are a number of factors. For a start, it’s crucial to consider who is making the claims (and why). Anthropic has skin in the game. What’s more, most of the people telling us that something big is about to happen have reached that conclusion largely on the basis of how fast AI coding tools are getting. But not all tasks can be hacked with coding. Other studies have found that LLMs are bad at making strategic judgment calls, for example.
What’s more, when they’re deployed, the tools aren’t just dropped into a cleanroom. They need to work in places contaminated with people and existing workflows. And sometimes adding AI will make things worse. Sure, maybe those workflows need to be torn up and refashioned around the new technology for it to achieve transformative status, but that will take time (and guts).
That big hole? It’s right where Step 2 should be. The lack of agreement on exactly what’s about to happen—and how—creates an information vacuum that gets filled by the latest wild claim of the week, evidence be damned. We’re so unmoored from any real understanding of what’s coming and how it will be deployed that a single social media post can (and does) shake markets.
We need fewer guesses and more evidence. But that’s going to require transparency from the model makers, coordination between researchers and businesses, and new ways to evaluate this technology that tell us what really happens when it’s rolled out in the real world.
The tech industry (and with it the world’s economy) rests on the held-out promise that AI really will be transformative. But that is not yet a sure bet. Next time you hear bold claims about the future, remember that most businesses are still figuring out what to do with their underpants.