In the Midst of Conflict with OpenAI, Elon Musk’s xAI Secretly Removed Benefit Corp Status

Elon Musk may have started xAI as a Nevada benefit corporation, but quietly terminated that status last year. As a benefit corporation, xAI was obligated to deliver environmental and social benefits apart from its financial goals.

Secretive Switch

The change of status was so secretive that even Musk’s lawyer referred to xAI as a benefit corporation in legal filings in May. Now, it’s a classic case of the ‘pot calling the kettle black,’ considering Musk’s stance about OpenAI’s transition to a ‘for profit’ company.

When Elon Musk created his artificial intelligence startup xAI in 2023, he incorporated it as a Nevada public benefit corporation, making a formal commitment to positively impact society and to post regular disclosures about progress on its non-financial goals.

The launch of xAI followed Musk’s split with OpenAI, which he helped start eight years earlier as a nonprofit before the AI lab went on to take billions of dollars from Microsoft en route to becoming a massive business.

Running Battles

Musk’s spat with OpenAI took a legal turn early last year, when he sued the AI startup and CEO Sam Altman for breach of contract, alleging they abandoned the company’s founding mission to develop AI “for the benefit of humanity broadly.” As part of his lawsuit, Musk sought to block OpenAI from converting into a for-profit entity.

Meanwhile, xAI changed its own structure, terminating its PBC status, according to records on file with Nevada’s secretary of state.

Nevada public records show that as of May 9, 2024, xAI’s distinction as a PBC was gone.

And when xAI merged with X (formerly Twitter) earlier this year, the combined company remained without its PBC structure, according to its articles of incorporation, dated March 28.

A month after shedding its PBC designation, xAI began using dozens of natural gas turbines to power its data center in Memphis, Tennessee, where the company trains and processes the data behind its Grok chatbot. While xAI, and its supplier, Solaris Energy Infrastructure, initially promised to use pollution controls with the turbines, those haven’t yet materialized.