OpenAI abandons plan to become for-profit company

OpenAI chief executive Sam Altman. AFP

OpenAI chief executive Sam Altman said on Monday that the company behind ChatGPT will continue to be run as a non-profit organisation despite contested plans.

The structural issue had become a significant point of contention for the artificial intelligence pioneer, with major investors pushing for the change to better secure their returns.

AI safety advocates had expressed concerns about pursuing substantial profits from such powerful technology without the oversight of a non-profit board of directors acting in society's interest, rather than for shareholder profits.

“OpenAI is not a normal company and never will be," Mr Altman wrote in an email to staff posted on the company's website.

“We made the decision for the non-profit to stay in control after hearing from civic leaders and having discussions with the offices of the Attorneys General of California and Delaware.”

OpenAI was founded as a non-profit in 2015 and later created a "capped" for-profit entity allowing limited profits to attract investors, with cloud computing giant Microsoft becoming the largest early backer.

This arrangement nearly collapsed in 2023 when the board unexpectedly fired Mr Altman. Staff revolted, leading to his reinstatemen,t while those responsible for his dismissal left.

Alarmed by the instability, investors demanded that OpenAI turn to a more traditional profit structure within two years.

Any status change, however, requires approval from state governments in California and Delaware, where the company is based and registered, respectively.

The plan faced strong criticism from AI safety activists and co-founder Elon Musk, who sued the company he left in 2018, claiming the proposal breached its founding philosophy.

In the revised plan, OpenAI's money-making arm will now be fully open to generate profits but, crucially, will remain under the non-profit board's supervision.

“We believe this sets us up to continue to make rapid, safe progress and to put great AI in the hands of everyone,” Mr Altman said.

OpenAI's major investors will probably have a say in this proposal, with Japanese investment giant SoftBank having made the change to profit a condition for its massive $30 billion investment, announced on March 31.

In an official document, SoftBank stated its total investment could be reduced to $20 billion if OpenAI does not restructure by the end of the year.

The substantial cash is needed to cover OpenAI's computing requirements to build increasingly energy-intensive and complex AI models.

The company's original vision did not contemplate “the needs for hundreds of billions of dollars of compute to train models and serve users", Mr Altman said.

SoftBank's contribution in March represented most of the $40 billion raised in a funding round that valued the ChatGPT maker at $300 billion, marking the largest capital-raising event ever for a start-up.

The company has become one of Silicon Valley's most successful start-ups, propelled to prominence in 2022 with the release of ChatGPT, its generative AI chatbot.