OpenAI Transforms Business Model, Lifts Profit Caps While Reinforcing Nonprofit Oversight

OpenAI is undergoing a major structural shift, eliminating previous limits on investor returns while ensuring its nonprofit foundation remains in control. The company is converting its existing for-profit arm into a "public benefit corporation" (PBC), a business model that balances profitability with societal impact.

CEO Sam Altman shared the news in a letter published Monday, emphasizing the need to scale responsibly:

"We want to operate in a way that allows us to make our services widely accessible to all of humanity."

This transition comes amid rising tensions with Microsoft, OpenAI’s largest backer, which has invested $13.75 billion into the company. According to Bloomberg, Microsoft is waiting to see the full implications of the conversion before offering full support.

The Road to AGI and Massive Capital Requirements

Altman’s announcement follows a bold claim earlier this year that OpenAI is close to achieving artificial general intelligence (AGI), a form of AI that can perform any cognitive task a human can. In a recent blog post, he predicted the first wave of AI agents could enter the workforce in 2025, marking what he calls a turning point in human-machine collaboration.

However, Altman noted that reaching true AGI will require staggering resources:

"This effort currently needs hundreds of billions of dollars and may eventually demand trillions."

Pushback from Former Employees and Legal Scrutiny

The restructuring has triggered backlash from former OpenAI staff, primarily a California-based coalition, who raised concerns about the potential misuse of nonprofit assets. In a letter to California Attorney General Rob Bonta, they requested oversight to prevent those assets from being diverted for private gain.

To ensure transparency, OpenAI has invited input from both California and Delaware attorneys general, who are responsible for assessing the fair market value of the nonprofit’s stake in the restructured entity.

Altman’s Power Curbed Under New Governance

While Altman remains the face of OpenAI, the changes will reduce his control. By keeping the nonprofit board in charge, the organization aims to ensure that strategic decisions remain aligned with public interest, not just profit motives.

The shift also comes in the wake of controversy surrounding a recent ChatGPT update, which was rolled back after users complained the chatbot had become “overly flattering” and less helpful. The company acknowledged the misstep and reverted to a more balanced version.

Legal Battle with Elon Musk

OpenAI also finds itself in a legal tug-of-war with co-founder Elon Musk, who opposes its evolution into a profit-seeking enterprise. Musk, who once attempted to acquire the company for $97.4 billion, has filed a lawsuit against OpenAI, claiming it has deviated from its original nonprofit mission. OpenAI has since countersued.

Despite legal challenges, the company's valuation continues to soar, now estimated at $300 billion following a $40 billion funding round in March. Since 2019, OpenAI has operated under a unique capped-profit model, limiting investor returns to 100x their initial investment, a rule that is now being phased out.

Altman concluded his letter with a reaffirmation of OpenAI’s mission:

"Our goal is for our nonprofit to become the most impactful in history, using AI to drive meaningful outcomes for humanity."