OpenAI Shifts Gears, Plans Transition To For-Profit Model

OpenAI, the parent company of ChatGPT, has entered early talks with California authorities regarding a transition to a for-profit business model.

This shift would represent a significant change in the governance structure for the AI pioneer.

With the transformation, OpenAI will notably depart from its 2015 founding principles as a non-profit research lab.

The Sam Altman-led company has submitted the proposal pending approval by the California attorney general's office, Reuters reported.

OpenAI is working to establish a for-profit governance structure as a way to boost investor engagement. According to Reuters, the Microsoft-backed company embarked on the project back in September to position itself as a dominant player in the rapidly evolving AI landscape.

"While our work remains ongoing as we continue to consult independent financial and legal advisors, any potential restructuring would ensure the nonprofit continues to exist and thrive and receives full value for its current stake in the OpenAI for-profit with an enhanced ability to pursue its mission," OpenAI nonprofit board chairman Bret Taylor said in a statement to Bloomberg News.

OpenAI set up a profit-making subsidiary in 2019 to secure funding for its costly AI projects. However, CEO Altman and the non-profit board clashed over how to balance AI safety with commercial goals.

In 2023, Altman was briefly fired from OpenAI only to be rehired, as the company continued to face challenges trying to reconcile its mission to develop safe AI with the pressure to generate revenue.

The AI pioneer wants to transform into a public benefit corporation to balance profitability with its social goals. It will now have a hybrid structure where the non-profit arm will continue to exist as a minor stakeholder in the revamped model, OpenAI's Chief Strategy Officer Jason Kwon told Bloomberg News.

In another development, OpenAI reportedly invested in a robot startup named Physical Intelligence alongside Amazon founder Jeff Bezos, Thrive Capital, and Lux Capital. The startup, based out of San Francisco, has so far raised $400 million in total funding, reaching a post-money valuation of $2.4 billion, CNBC reported.

While OpenAI's investment in Physical Intelligence hints at its robotics ambitions, the companies also appear to share AI goals, as the latter seeks to explore the endless possibilities of " bringing general-purpose AI into the physical world."

Recently, OpenAI has introduced a search feature in ChatGPT, its viral chatbot, which will help it take on Bing and Google with enhanced AI capabilities.