In a significant strategic reversal, OpenAI Chief Executive Sam Altman announced yesterday that the artificial intelligence company behind ChatGPT will maintain its nonprofit governance structure rather than converting to a for-profit entity as previously planned.
“OpenAI is not a normal company and never will be,” Altman stated in a company-wide email that was subsequently published on OpenAI’s website. The decision came “after hearing from civic leaders and having discussions with the offices of the Attorneys General of California and Delaware,” according to Altman.
The structural question had emerged as a major point of contention for the AI pioneer. Originally established as a nonprofit in 2015, OpenAI later created a “capped” for-profit subsidiary to attract investment while maintaining nonprofit oversight. This hybrid arrangement nearly collapsed in November 2023 when the board abruptly fired Altman, only to reinstate him days later following staff protests.
The reinstated leadership had been planning to transition OpenAI into a public benefit corporation (PBC), a move that would have reassured investors considering the substantial funding required for the company’s ambitious AI development goals. The plan faced opposition from AI safety advocates and Elon Musk, an OpenAI co-founder who departed in 2018 and later filed a lawsuit alleging the restructuring violated the organization’s founding principles.
Under the revised arrangement, OpenAI’s commercial arm will continue generating profits but remain under the supervision of the nonprofit board, which prioritizes societal benefit over shareholder returns.
“We believe this sets us up to continue to make rapid, safe progress and to put great AI in the hands of everyone,” Altman explained in his message.
The decision may impact OpenAI’s funding prospects. Japanese investment giant SoftBank, which recently committed to a massive investment, had reportedly made the transition to a for-profit structure a condition for their full $30 billion contribution. According to official documentation, SoftBank’s investment could be reduced to $20 billion if OpenAI doesn’t restructure by year-end.
Such substantial financing is necessary to support OpenAI’s enormous computing requirements. Altman acknowledged that the company’s original vision didn’t anticipate “the needs for hundreds of billions of dollars of compute to train models and serve users.”
SoftBank’s March investment formed the majority of a $40 billion funding round that valued OpenAI at $300 billion, reportedly the largest capital raises ever for a startup.