What Elon Musk's Testimony Reveals About the OpenAI Lawsuit

Elon Musk spent nearly three hours answering questions from OpenAI's lawyers during his testimony in an ongoing lawsuit. The case involves Musk's AI company, xAI, suing OpenAI and Microsoft. His testimony showed how he views the way OpenAI is structured and raised questions about whether the company stayed true to its original mission.

The Core Disagreement Over Company Structure

Musk testified that he has no problem with OpenAI having both a nonprofit side and a for-profit side. However, he said the for-profit part should still serve the nonprofit's original purpose.

Think of it like a restaurant run by a charity. The charity could open a for-profit branch to make money, but that branch should still support the charity's goals. According to Musk, OpenAI's problem is that the for-profit side has taken over decision-making — what he called "the tail wagging the dog."

Business Insider reported on Musk's description of this imbalance. His concern centers on which part of the organization actually holds the power, rather than on having two parts in the first place.

Musk started his own AI company, called xAI, in 2023. He set it up as what's called a public benefit corporation, saying he wanted to focus on open-source AI — meaning AI tools that are freely shared with the public rather than kept private.

How Musk and OpenAI Fell Apart

The bad blood between Musk and OpenAI goes back years. In 2017, both sides agreed that OpenAI would need a for-profit structure to survive and grow. But those negotiations failed. According to OpenAI's public response, the company refused Musk's proposal to merge it into Tesla, and it would not give him the control he wanted. Musk left OpenAI's board in January 2018.

There's an interesting detail in the lawsuit. A woman named Shivon Zilis worked on OpenAI's board from 2020 to 2023, but she was also a manager at Musk's other companies, Tesla and Neuralink. Wired's reporting indicates that OpenAI's lawyers claim Zilis acted as a secret go-between connecting Musk to OpenAI even after he had officially left.

The Antitrust Claim

The lawsuit makes a serious allegation: that OpenAI and Microsoft used illegal tactics to block competitors. Specifically, Musk and xAI claim that OpenAI told its investors not to fund rival AI companies. This is a big deal legally, because if proven true, it would be against U.S. antitrust law.

Court filings detail these accusations in detail. We have seen this pattern before in other industries, when one company becomes so dominant that it can muscle out competitors. Microsoft faced this in the late 1990s, and Google faced it in the 2000s. But AI development is different because it's newer and moving faster.

The concern here is particularly acute because training cutting-edge AI models requires enormous amounts of money and computing power. Very few companies can afford it, so controlling who gets investor funding becomes a powerful way to block competition.

What Comes Next

The trial continues, and more testimony is expected from major figures including Sam Altman, the CEO of OpenAI, and Satya Nadella, the CEO of Microsoft. Reuters describes the proceedings as showing a long-running power struggle over OpenAI's direction.

The trial could set a legal precedent for how organizations are allowed to change from nonprofit to for-profit status, especially when they claim to serve the public interest. It also highlights a real tension in AI development: the biggest AI models now require so much money and computing power that it is hard to keep them open to everyone like some of the original founders wanted to do.

The outcome may help establish rules for how AI companies can — and cannot — use their power to block competitors from getting funding and resources.