By now most have heard about the "offer" that Elon Musk and other investors made for OpenAI.  This came as a surprise, taking on the AI world by storm.

It was a deal that was presented to the board of OpenAI and it was rejected.  

Since that time, xAI released Grok3, a model that many state have jumped to the top of all benchmarks.  Musk himself stated that this might be the last time that anyone is ahead of Grok.

If that is the case, what is he doing with OpenAI?

To understand this, we have to dig into the history of OpenAI and how it is structured.

<center> https://img.inleo.io/DQmdDJyfQ5ydR516B1RdpkBxEkqeW183w8GbRLGE5SVzmdN/image.png 

[Source](https://www.indiatvnews.com/technology/news/why-openai-board-will-be-gutted-if-sam-altman-returns-here-is-what-elon-musk-thinks-2023-11-19-903460) </center>

# What Is Elon Musk Doing With OpenAI?

Elon Musk was one of the prime "investors" in OpenAI.  Much of the original funding came from him.  I use investor in quotes because this was set up as a non-profit organization.

Over the years, Sam Altman took a larger role in the company.  He is the driver behind the success achieved, with Elon not involved to in any of the daily activities.  

One of the things Altman did was to turn OpenAI into a for profit organization.  This led to a lawsuit filed by Musk.  Altman achieved this by establishing a for profit arm under the non-profit.  Here we have the first distinction that is important.

OpenAI has two components.  They each have assets along with valuations.  It is the source of a lot of confusion.

Elon Musk's bid for OpenAI was for the non-profit.  He was seeking to "acquire" the assets.  Again, we have to dance around because I do not believe that Musk had any interest in taking over OpenAI.  Instead, he is throwing a major monkey wrench into Altman's plans.

The valuation of OpenAI has exploded over the last few years.  The valuation increases with each fundraising, with the next tier expected to top $300 billion.  So why did Elon bid only $97 billion?

Our answer resides in the fact this is the for-profit entity.  That is what is getting the funding.  Altman is selling off parts of that.  However, to achieve success, the assets in the non-profit are required.

Hence we see what Musk was up to.

## Placing A Market Value

It is likely Altman's plan was to acquire the non-profit for next to nothing.  After all, it is the for profit that is enhancing the value of the underlying.

At this point, we have to add another factor in the Musk bid.  He stated that his team will top any offer for the non-profit.  This poses a problem for Altman.  If he presents a bid to the board, it is already on record that Musk will top it.  A board has a responsibility to take the best deal.  Naturally, this could end up being Altman but Musk is running up the price tag.

In other words, Altman is not going to get a free ride.

The dispute between Altman and Musk is well known (and very public).  Many question Altman's motives with regards to OpenAI.  There were a number of people who left the company citing Altman's lack of concern about safety.  He was publicly fired, only to have an employee revolt force the board to reconsider.

Of course, many of those employees since left.

This is a battle of big money that isn't going to wane.  Fortunately, for Altman, when taking on the richest man in the world, he is doing so in an arena where raising billions is like asking for a quarter on the street corner.  OpenAI keeps receiving billions on an increased valuation.  It does not appear like it will stop anytime soon.

Some might point to the lack of profits.  Silicon Valley is accustomed to this, with investors pouring money into ventures for years.  With the potential of AI, this is happening on a grander scale.

How is this fight going to look when OpenAI, the for profit arm, has a valuation of over $1 trillion (something I feel could well happen)?  Musk, for his part, has xAI moving up the ranks.  It is expected to have another round of funding at $75 billion.  This is not bad for a company that is only a few years old.

xAI has 200K GPUs already and is pushing towards 1 million.  Grok is receiving rave reviews and many are jumping on board with it being the present leader.  The key is the time it took for xAI to get to this point.

Here is the kicker: Musk rushed Grok3 a bit for a reason.  While this is speculation, Altman could find himself behind the proverbial 8 ball again.

The first time it happen was when Altman admitted that OpenAI was compute constrained.  WIth the GPUs flowing to Musk (along with the likes of Meta) we can see why.

This could be mirrored in the capital markets.  Musk could swoop in and start to suck up the AI capital from the VC firms.  After all, if he is racing ahead at a pace unmatched by his rivals, this is the horse to bet on.

It is a situation that could have financial implications on OpenAI.  That isn't to say that Altman will not be able to raise capital.  I believe he will.  The pace is what will be slowed.



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