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Inside Musk's $97B Bid For OpenAI

Inside Musk's $97B Bid For OpenAI

AI Breakfast
February 12, 2025

Good morning. It’s Wednesday, February 12th.

Today in Tech History: in 1877, Alexander Graham Bell made the first long-distance telephone call. See the phone he used here.

In today’s email:

OpenAI To Develop Own Chips
Musk’s $97B Bid for OpenAI
US and UK refuse to sign the Paris AI Action Summit
4 New AI Tools
Latest AI Research Papers

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Today’s trending AI news stories

OpenAI moves to develop its own AI chips by 2026

OpenAI is on the cusp of completing its first bespoke AI chip, with plans to roll out mass production by 2026, courtesy of TSMC's 3-nanometer process. A team of 40 engineers, led by former Google chip expert Richard Ho, is overseeing development in collaboration with Broadcom, focusing on a design suited for both training and inference.

Image: Trendforce

However, the relatively small team raises doubts about OpenAI’s ability to match the scale of efforts by Google and Amazon. The chip initiative is seen as a strategic move to reduce reliance on Nvidia and strengthen OpenAI’s negotiating position with suppliers amid intensifying competition. Meanwhile, Amazon, Meta, and Microsoft are ramping up investments in AI infrastructure, while OpenAI itself is involved in the $500 billion Stargate initiative. Read more.

Musk's $97 Billion Bid Is M&A Trolling That Could Derail OpenAI's Fundraising

A consortium led by Elon Musk offered $97.4 billion to acquire the nonprofit organization controlling OpenAI, the company behind ChatGPT. This unsolicited bid complicates OpenAI's plans to transition into a for-profit entity and raises questions about the nonprofit's obligations.

OpenAI's current structure involves a nonprofit controlling a for-profit subsidiary. The transition plan involves making the subsidiary a standalone for-profit company, with the nonprofit retaining a significant stake. Experts estimate this stake could be worth around $65 billion based on OpenAI's current valuation.

Musk's offer, however, significantly exceeds this estimated value. His attorney argues that the nonprofit must be fairly compensated and that the $97.4 billion offer represents the true market value of OpenAI's for-profit arm. This move puts pressure on OpenAI's board, potentially requiring them to consider Musk's bid, even if they find his involvement undesirable. It forces OpenAI to justify its internal valuation of its for-profit arm, potentially impacting negotiations with existing investors like Microsoft.

no thank you but we will buy twitter for $9.74 billion if you want
— Sam Altman (@sama)
9:11 PM • Feb 10, 2025

OpenAI CEO Sam Altman dismissed the offer with a sharp jab on 𝕏. In an interview with Bloomberg Television, Altman took a personal slight at Musk responding to a question about whether Musk’s bid was “from a position of insecurity” about his own AI company, xAI. Altman reaffirmed that OpenAI is not for sale and that their mission remains focused on building AI for the benefit of humanity.

The company’s nonprofit status puts it in a bind—legally bound to maximize value for its mission while facing Musk’s multibillion-dollar bid and the tension between its charitable purpose and for-profit ambitions is now on full display. How this plays out could set the tone for the entire AI industry and not just OpenAI’s future. Read more.

US and UK refuse to sign the Paris AI Action Summit statement

At the AI Action Summit in Paris, 61 countries, including China, India, and Canada, signed a joint declaration advocating for an “open, inclusive, and ethical” approach to artificial intelligence. Notably, the U.S. and the U.K. abstained, citing concerns about ideological biases and the risk of AI being co-opted for authoritarian purposes.

Vice President JD Vance underscored the nation’s resolve to retain its AI leadership, distancing American innovation from international governance frameworks.

While the declaration calls for greater transparency, security, and cooperation in AI development, it drew criticism for its perceived lack of urgency and ambition. Leading voices, such as Anthropic’s Dario Amodei, warned that the failure to act swiftly on AI governance risks missing an opportunity to address global challenges. Read more.