These are the implications of the Elon Musk-OpenAI lawsuit to watch, and more AI and tech news this week

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There’s new drama surrounding OpenAI — and the saga seems to be getting saucier by the day.

Last week, billionaire Elon Musk sued OpenAI and co-founders Sam Altman and Greg Brockman, alleging that they breached their founding agreement by pursuing profits instead of developing AI that benefits humanity.

The company hit back this week in a public rebuttal, with a post from Brockman, Altman, Ilya Sutskever, John Schulman and Wojciech Zaremba saying that they plan to have all claims in the suit dismissed.

The post also countered Musk’s claims that he was against OpenAI pursuing profits, featuring excerpts from his emails that showed him accepting plans for it to become a for-profit business. OpenAI’s co-founders instead accused Musk — an early backer of OpenAI — of seeking “absolute control” of the company and trying to merge it with Tesla.

The lawsuit marks the latest high-profile battle for OpenAI, which has emerged as the most prominent company at the forefront of AI, even despite some chaotic leadership turmoil not too long ago. (Note: LinkedIn parent Microsoft is an investor in OpenAI.) But unlike the last kerfuffle, which caught the company on the backfoot, OpenAI looks to be in a pretty good position for this fight, experts say.

“Their (OpenAI’s) response to Elon's lawsuit is like the end of Avengers when every hero in history descends on Thanos,” Conor Grennan, dean of students and head of generative AI at New York University’s Stern School of Business, wrote on LinkedIn. “Look, Elon Musk is brilliant. He is also the kid that, as soon as he starts losing a race, tells on everyone to his mom that they shouldn't be racing. We’ve seen that over and over.”

Veteran tech investor Vinod Khosla, who is also an early investor in OpenAI, reiterated that Musk’s move was “a case of sour grapes” in a recent interview with LinkedIn News.

“He hasn't acknowledged the fact that what he tried to do is make sure that he could get control of OpenAI himself, and merge it with the efforts around self-driving AI at Tesla,” Khosla told me.

Many view the lawsuit as the culmination of Musk's laundry list of grievances against OpenAI — with him having been critical of Altman's leadership of the company since he left OpenAI's board in 2018. Musk will face an uphill battle from a legal standpoint, even though his claims are not entirely meritless, experts said.

For instance, it has historically been difficult for courts to litigate when investors bring claims to the effect that a company's management isn’t acting in the interests of its shareholders, said Jason Sitomer, VP of legal at AI-powered fintech investment firm Tifin.

“It’s extremely difficult to prove business intent — courts prefer not to put themselves in the seat of judgment in determining whether something is for the benefit of shareholders or not,” he told LinkedIn News. “There are practical considerations too, where OpenAI could conceivably argue that commercialization was necessary in order to further their mission to develop AGI for the public benefit.”

It’s also not clear if a court would interpret the discussions between Musk and OpenAI’s co-founders as a binding contract, which Musk is arguing in his lawsuit.

“The ‘contract’ that Sam Altman and OpenAI allegedly breached isn’t something like an express and binding agreement executed by two or more parties (i.e., what you normally think of as ‘contract’ in a business context), but rather an e-mail,” Rex Ritesh Chatterjee, managing principal at private law practice Chatterjee Legal, wrote on LinkedIn.

Such discussions are called “illusory promises” and are generally not legally enforceable, Andrew Stoltmann, a securities lawyer and adjunct professor at Northwestern University’s law school, told Bloomberg. If it’s established that there was no contract, then Musk’s case will likely be dismissed.

A common thread between the OpenAI board’s abrupt firing of Altman in November and Musk’s lawsuit, however, is artificial general intelligence (AGI), which is a concept that has no agreed-upon definition in the world of AI.

Musk’s suit claims that OpenAI’s GPT-4 model is itself AGI, and therefore the company is violating its charter that states that any AI system constituting AGI shouldn’t be commercialized. But OpenAI defines AGI as “a highly autonomous system that outperforms humans at most economically valuable work,” and under the terms of its charter, OpenAI’s nonprofit board has the sole discretion to determine when AGI has been achieved — which it hasn't as yet.

This would be a complicated argument to make in court, as in order to make a ruling, a jury would have to say whether or not OpenAI has achieved AGI.

“I can't even begin to imagine how one would succeed in a determination in what is or is not AGI,” said Tifin’s Sitomer.

Still, the lawsuit ultimately raises several important questions that have been swirling around the AI industry related to AGI, ethics and governance — such as what exactly constitutes AGI, the direction of AI regulation, whether a company can maintain its foundational principles while navigating commercial realities, and more.

“The outcome of this case could set a precedent for how mission-driven tech companies may balance profit with purpose, or more specifically, how they may not, further underscoring the need for clearer corporate structures and accountability mechanisms,” Sitomer wrote on LikedIn.

Here’s where we bring you up to speed with the latest advancements from the world of AI.

• Meta is working on a "giant" AI model powerful enough to recommend videos across Facebook, from Reels to longer videos on users' feeds, CNBC reports. Historically the company has used separate models for different platforms, but now that it's investing heavily in chips from Nvidia, it will have the processing power to use a single model for its "entire video ecosystem," Facebook head Tom Alison told an audience at a Morgan Stanley-hosted tech conference in San Francisco. He said a test of the new architecture increased Reels watch time between 8% and 10%.

• The rapid rise of NVIDIA has echoes of another "Magnificent Seven" ascent — and potential cautionary tale. While investors were similarly high on Teslaand electric vehicles in 2017, shares have now dropped 50% from their peak, with the hype refocusing on artificial intelligence, according to Bloomberg. Tesla's current woes "should be sobering for Nvidia investors who see the stock as a limitless bet on an AI future." For the time being, however, the chipmaker is reporting record revenue and demand shows no signs of slowing down. Nvidia is now the third-most-valuable U.S. company, with a market value above $2 trillion. Speaking of stocks, the tech sector is officially out of its post-pandemic slump. The tech-heavy Nasdaq ended last week at a fresh high, boosted by bets on chipmakers and AI's growth.

• Usually a bastion of tech prowess, Apple has had a bruising week. Not only did it scrub development of its shrouded-in-secrecy electric car, but anxiety is building among investors over what precisely Apple is up to in AI, The Wall Street Journal reports. So far, CEO Tim Cook has been tight-lipped, only saying the company has been "investing and innovating in AI for many, many years." Analysts expect generative AI software features to debut in June, and investors appeared to welcome the news that many workers on the scuttled EV project are shifting focus to AI.

• Trust in AI and the companies that develop the technology is dropping in the U.S. and around the world, according to new data from Edelman. Globally, trust in AI companies has dropped to 53%, down from 61% five years ago. In the U.S., trust has dropped from 50% to 35% over the same period. The tech industry is at the losing end of the bargain, ranking as the most trusted in only half of countries polled, versus 90% of countries eight years ago.

Here’s a list of other notable AI developments from this week:

• AI startup Anthropicunveiled its Claude 3 chatbots, which it claims can run benchmark tests faster than OpenAI's offerings. The company also announced a deeper partnership with Amazon, which previously invested $4 billion in the startup.

• Speaking of Amazon, the company is bringing a generative AI assistant called Rufus to online shopping to help shoppers with personalized gifts. The chatbot is currently in beta and only available to a small number of Amazon customers.

• AI-based mental health triage and support tools startup Limbic has raised $14 million in Series A funding led by Khosla Ventures.

• Toronto-based AI image-generation startup Ideogram — a competitor to Midjourney — has raised $80 million in Series A funding led by Andreessen Horowitz, CEO Mohammad Norouzi posted on LinkedIn.

• Figure AI, a startup developing humanoid robots, raised $675 million in Series B funding from investors including LinkedIn parent Microsoft, Nvidia, Jeff Bezos (through Bezos Expeditions), Parkway Venture Capital, Intel Capital, Align Ventures and ARK Invest.

Catch up on the tech headlines you may have missed this week and what our members are saying about them on LinkedIn.

• Redditors could make or break the company's upcoming IPO. About 75,000 of the site's most devoted users have days left to register for a chance to buy shares before Reddit, Inc. starts trading on the open market, Bloomberg reports. But members of the r/WallStreetBets forum — famously (or infamously) credited with initiating the GameStop short squeeze — are threatening to bet against the stock, arguing that Reddit is still consistently losing money. Others say the chance to invest isn't enough compensation for the unpaid work they've put into making the site successful. The company could be valued at as much as $6.5 billion in the IPO.

• Spotify wants to offer customers pricing information and links to subscribe right in its app — but Apple has to sign off first. The music-streaming service has prepared the update and submitted it to Apple, per The Verge. The move comes just days after the EU hit Apple with a $2 billion fine for blocking competitors from doing exactly what Spotify is attempting. Apple vowed to appeal the decision, arguing that EU regulators didn't prove that its practices harmed consumers. The subsequent legal battle could take years to resolve. At the same time, the company has terminated an Epic Games developer account in Europe, effectively blocking the Fortnite maker from launching its own app store on iOS in the EU, the company said in a blog post.

• Meanwhile, Apple is facing headwinds in China. iPhone sales tanked in the country by nearly a quarter in the first six weeks of 2024, according to a new report from Counterpoint Technology Market Research — thanks in large part to competition from Huawei's Mate 60 smartphone, which launched last year. Huawei smartphone unit shipments logged a 64% increase over that same six weeks, while other homegrown brands such as vivo and Xiaomi Technology saw sales drop, though not as much as Apple. Overall, China's mobile market shrank by 7% in the first month-and-a-half of 2024. In January, Apple offered rare iPhone discounts in the country in a bid to boost sales.

• Four former Twitter executives are suing Elon Musk and the company — now called X Corp. — arguing they were owed more than $128 million in severance pay. The plaintiffs, ex-CEO Parag Agrawal, ex-CFO Ned Segal, former head of legal and policy Vijaya G. and former general counsel Sean Edgett, maintain that their contracts included language saying they could get a payout if Twitter was no longer a public company. Musk fired the top executives shortly after acquiring Twitter and taking it private, saying the dismissals were for cause and therefore he wasn’t required to provide severance pay. The former executives argue Musk and X have been "stiffing employees, landlords, vendors, and others," pointing to dozens of vendor lawsuits over nonpayment. Musk and X have not commented on the suit.

• The recent ransomware attack against Change Healthcare, a widely used prescription processing service owned by UnitedHealth Group, is "the most serious incident of its kind," said American Hospital Association chief Rick Pollack in a new statement. The attack, which was discovered Feb. 21, has disrupted hospitals and pharmacies across the U.S. A UnitedHealth spokesman said more than 90% of the 70,000-plus pharmacies that use Change Healthcare are using alternate payment processing methods in the meantime. Earlier in the week, the company confirmed that ALPHV/BlackCat, a Russian ransomware gang, is responsible for the attack.

• The pandemic has helped narrow the gender gap in tech, based on a Financial Times analysis, which pointed to strong demand and increased acceptance of flexible work schedules as contributing factors. Though women are making gains across the U.S., UK and EU, men still hold the greater share of tech jobs — which could be a problem as much of the field turns its focus to AI. Women held 35% of tech jobs in the U.S. at the end of 2023, up from 31% in 2019, per the Bureau of Labor Statistics.

Here’s keeping tabs on key executives on the move and other big pivots in the tech industry. Please send me personnel moves within emerging tech.

• Instacart CTO Varouj Chitilian is leaving the grocery delivery company, he announced on LinkedIn. Chitilian’s departure comes on the heels of the company’s COO Asha Sharma also leaving the company, just last week. 

• OpenAI has expanded its communications team, hiring Liz Bourgeois to handle policy and corporate, Lindsay McCallum Rémy to oversee product and research, and Steve Sharpe to tackle partnerships communications.

• Khosla Ventures has added three new partners to its roster, including Ethan Choi from Accel, Jai Sajnani of Flight Deck Capital and Alex Bentley from Block, in which Khosla is an investor.

• Sam Blond, formerly the CRO of Brex, is leaving Founders Fund, he announced on LinkedIn.

• Palo Alto-based venture firm Eclipse has hired Jiten Behl, previously Rivian's chief growth officer and one of its first employees, as a partner.

• Calibrate Ventures has hired Adrien Gaidon, Toyota Motor Corporation's former machine learning head, as a partner.

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