On Monday, an Oakland jury took under two hours to unanimously reach a verdict dismissing Elon Musk’s lawsuit against Sam Altman and OpenAI. Throughout the trial Musk had portrayed it as the good fight to prevent Altman from “stealing” OpenAI, which was founded as a nonprofit. Others, however, framed it as a more cynical effort. “It’s too late now to gin up something to harm a competitor,” said OpenAI’s lead lawyer, William Savitt, during his opening arguments.
In 2015, Musk co-founded OpenAI with Altman, among others, out of concern that powerful future AI systems would be developed by Google and controlled by other billionaires. He founded xAI in 2023, after a dispute over control of OpenAI.
Musk had asked the court to reverse OpenAI’s for-profit conversion, which the company completed late last year, and to return roughly $150 billion to the nonprofit. Such a decision would have been “catastrophic” for OpenAI, says Charlie Bullock, a senior research fellow at LawAI, and would have “sent shockwaves through the global economy.”
The jury’s decision that Musk waited too long to sue, exceeding a three-year statute of limitations, is just the latest blow to Musk and xAI. Rather than strengthening xAI’s position in the industry, the trial mostly served to illustrate its various weaknesses. In February, Musk’s SpaceX acquired xAI, with the AI company reportedly valued at around $250 billion—far short of OpenAI’s most recent $852 billion valuation. Over 50 employees subsequently departed for competitors such as Meta and Thinking Machines Lab. Downloads of Grok, the company’s flagship chatbot, have fallen by 60% since January. And less than 1% of Grok users had a paid subscription, compared to roughly 6% of ChatGPT users who say that they pay for the upgraded product. “xAI is currently falling behind in the AI race,” Peter Wildeford, head of policy at the AI Policy Network, told TIME.
Musk’s sworn testimony on April 30 dealt another blow to his AI company’s credibility. The xAI CEO seemed to admit on the stand that xAI “partly” trains its models on the outputs of OpenAI’s models, and suggested that “all the AI companies” train on competing models’ outputs. While Chinese AI companies, which lag frontier AI companies’ models by about eight months, have been accused of the same practice, there is no indication that other Western frontier AI labs do so. Grok lags OpenAI’s latest model, GPT-5.5, by about five months, according to data from Epoch AI, an AI research institute. It would be “pretty surprising” if OpenAI, Anthropic, or Google DeepMind were training on competing models’ outputs, says Wildeford.
And outside of the courtroom, xAI was making moves that weakened the company’s position in developing AI models. On May 6, xAI announced that Anthropic would take over all compute capacity at Colossus 1, a facility xAI had already vacated in favor of its newer Colossus 2 data center. Musk had previously called Anthropic “woke” and “evil,” but backtracked as the deal was announced. “Everyone I met [at Anthropic] was highly competent and cared a great deal about doing the right thing. No one set off my evil detector,” he wrote on X.
The fact that xAI is renting out its computing resources to another AI company is a sign that there is insufficient demand to use its models, and that they “don’t know exactly what to do with those data centers,” says Nathan Calvin, general counsel at Encode AI, an AI advocacy group. “That’s clearly not good [for xAI].”
If xAI does fall behind in the race to develop AI models, Musk could still profit from the AI boom by providing computing power to other AI companies. Colossus 1 was built in just 122 days, demonstrating xAI’s capability for such infrastructure projects. Anthropic has “expressed interest” in renting orbital computing capacity from SpaceX.
SpaceX, complete with its new AI division, is reportedly aiming for an IPO on June 12, which could value the company at $1.75 trillion. But a pivot away from developing the AI models themselves would be yet another blow for Musk—both financially and personally.
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