OpenAI, the developer of ChatGPT, officially announced that it will change its organizational structure into a public corporation (PBC). This transformation aims to attract large-scale investments, enabling it to outpace competitors and accelerate the development of artificial general intelligence (AGI). However, OpenAI has faced significant resistance both internally and externally, given its history of growing its business under the premise of 'developing artificial intelligence (AI) for the advancement of humanity'.
◇ OpenAI declares itself a public corporation… aims for funding and independence from Microsoft
According to foreign media on the 31st, OpenAI is considering converting its existing for-profit subsidiary, which is under the control of a nonprofit board, into a public corporation that holds common stock. This change is based on the assessment that the new organizational structure will provide better conditions for investors. At the same time, it noted that a nonprofit will hold public corporation shares to balance public and commercial activities.
A public corporation is a company that pursues public purposes. However, while it declares its goals to the public, there is no legal obligation to enforce them, making it not significantly different from regular corporations. Both competitors of OpenAI, Anthropic and xAI, operate under a public corporation structure.
OpenAI announced through its official blog, "The reality that major corporations are investing hundreds of billions of dollars in AI development shows what is truly needed for OpenAI to continue pursuing its mission," adding, "We need to raise more capital than we had imagined."
OpenAI started as a nonprofit in 2015, and when it needed substantial funding for AI model development and training, it established a for-profit entity named OpenAI Global in 2019. OpenAI Global is responsible for developing AI models and commercialization. However, OpenAI Global operates under a unique structure as a 'profit-limited company,' where major decisions are made by the parent company OpenAI and profits are capped at 100 times the principal. Profits exceeding this cap are attributed to the nonprofit.
OpenAI's transition into a public corporation has been a planned process for some time. Currently, OpenAI holds a leading position in the generative AI model market, but its competitors include major tech companies such as Google, Meta, and xAI, which are armed with vast resources. To maintain market leadership, OpenAI urgently needs more development expenses, but it faces limitations in attracting investments under its current corporate structure. In October, OpenAI secured $66 billion (97 trillion won) at a corporate valuation of $157 billion (232 trillion won). However, projections suggest that it is no longer possible to attract investment as a private company, making funding through an initial public offering (IPO) necessary.
The re-establishment of relations with Microsoft (MS) is also cited as a reason. Currently, OpenAI is required to pay 20% of its revenue due to its contract with MS, and this condition will remain until a total of $92 billion (134.9 trillion won) is paid. Cloud infrastructure and API provision are also only available through MS. OpenAI, seeking independent growth following the success of ChatGPT, sees contract renegotiation with MS as crucial for its future growth and thus requires diversification of its revenue structure.
◇ Competitors raise their stakes; a thorny path expected
However, due to strong backlash from both inside and outside the organization, it remains uncertain whether OpenAI's current plan will proceed smoothly. Previously, OpenAI had conflicts with its employees over the push for a for-profit transition. Following the official announcement of this transition earlier this year, several key executives have resigned in succession. In February, co-founder and key researcher Andrej Karpathy left, in May, co-founder Ilya Sutskever, who led the dismissal of CEO Sam Altman, also resigned. In August, another co-founder, John Schulman, moved to Anthropic. In September, Chief Technology Officer Mira Murati left, and this month, Alec Radford, who led the development of OpenAI's image AI, 'DALL·E,' also resigned.
Additionally, last month, the suicide of former OpenAI researcher Balaji has intensified the controversy surrounding 'OpenAI's commercialization.' Balaji, who worked at OpenAI for four years and participated in the development of ChatGPT, revealed in an interview with The New York Times in October that "OpenAI is infringing copyrights and harming the internet environment" and posted an analysis of AI copyright infringement on his blog. Following his internal whistleblowing and warnings of raising issues, a month later, he was found dead at his home. The case was concluded as a suicide, but controversy has erupted following comments by Elon Musk, CEO of Tesla, questioning the cause of death.
External backlash is also strong. The most actively involved is Musk, CEO of xAI, who filed a lawsuit against OpenAI in February to halt its transition to a for-profit company. However, he withdrew the lawsuit in June only to file again in August for the same reasons. As of the 1st of this month, he has filed a preliminary injunction seeking to temporarily halt OpenAI's transition to a for-profit company. Notably, as a significant figure in the Trump administration, Musk may use this opportunity to impose greater checks on Altman's actions.
Meta warned the California Attorney General on the 12th that OpenAI's for-profit transition could cause 'tectonic shifts' throughout Silicon Valley. A Meta official criticized, through an official letter, that "OpenAI's new business model allows nonprofit investors to receive tax benefits while gaining for-profit level revenues."
Civic groups and experts are also opposing. The international youth alliance 'InCode,' which advocates for ethical AI development, has requested to support a brief in favor of Musk's preliminary injunction lawsuit. Following the official announcement of OpenAI's transition to a for-profit model, a united front against OpenAI is taking shape.
Geoffrey Hinton, a prominent figure in AI who won the Nobel Prize in Physics this year, issued a brief statement expressing support for 'InCode's' request. He said, "OpenAI has maintained its nonprofit status and received numerous tax benefits, and allowing it to destroy everything when it becomes uncomfortable sends a very bad message to other actors in the AI industry."