Behind Elon Musk’s $97.4 Billion OpenAI Bid

Summary

WSJ Tech News Briefing: Behind Elon Musk’s $97.4 Billion OpenAI Bid

Release Date: February 12, 2025
Host: Julie Chang
Podcast: WSJ Tech News Briefing by The Wall Street Journal

The February 12th episode of the WSJ Tech News Briefing delves deep into the escalating drama surrounding Elon Musk’s unexpected $97.4 billion bid to acquire OpenAI’s assets. Hosted by Julie Chang, the episode not only explores this high-stakes maneuver but also examines the broader implications of artificial intelligence (AI) advancements in defense and the open-source landscape.

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AI and the Department of Defense: Navigating Open Source Challenges

The episode opens with a discussion on the intersection of AI advancements and national defense. Craig Martel, CTO of Cohesity and former Chief Digital and AI Officer at the Department of Defense (DoD), engages in a dialogue with WSJ reporter Heather Somerville about the rise of AI startups partnering with defense tech giants like Anduril and Palantir.

Craig Martel highlights concerns about Chinese AI firm Deepseek:

“Let’s talk about Deepseek for a moment... there’s a lot of propaganda behind it, but there’s also been a lot of technical testing as well.”
[02:05]

Heather Somerville responds by emphasizing the challenges of regulating open-source AI:

“I don't think you can deal with the policy tools they have available to us... It’s like saying we're going to stop Linux. It doesn’t make any sense to me at all.”
[02:37]

Martel notes the call for enhanced export controls and stronger partnerships between industry and government:

“Plenty in Washington have called for a different approach to export controls... a whole of country response on AI.”
[02:06]

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Efficiency and Modernization in the DoD: The Introduction of DOGE

The conversation shifts to the DoD’s efforts to modernize and streamline operations through technology. Craig Martel discusses the department's initiative, DOGE (Department of Government Efficiency), aimed at slashing government spending and enhancing procurement processes for new technologies.

Heather Somerville underscores the balance between fiscal responsibility and talent retention:

“It’s a balance between doing the right thing with taxpayer money and keeping good talent around.”
[05:56]

Martel elaborates on strategic resource management:

“We try to recode the billets to be AI technical ones. So instead of going into cutting things, we tried to reuse things more wisely.”
[05:56]

This approach reflects the DoD’s commitment to leveraging existing resources while adapting to the rapid advancements in AI.

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Elon Musk’s $97.4 Billion Bid for OpenAI: A Game-Changing Move

A significant portion of the episode focuses on Elon Musk’s unexpected and unsolicited bid to purchase OpenAI’s assets for $97.4 billion. Berber Jin, a WSJ reporter, provides an in-depth analysis of the ramifications of this move.

Berber Jin explains Musk’s motivations and the reaction within OpenAI:

“Musk came up with this idea kind of out of left field... he's going to make my own bid to basically buy the assets of the nonprofit myself.”
[07:53]

Julie Chang probes into the impact on OpenAI’s CEO, Sam Altman:

“Why does this bid matter for Sam Altman?”
[07:53]

Jin details Altman’s response and the strategic maneuvers within OpenAI:

“Altman responded quite quickly. He went on X and said we're not taking the bid... he thinks it's a political tactic.”
[11:00]

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Reactions from OpenAI Leadership: Firm Stance Amidst Turbulence

Brett Taylor, chairman of OpenAI, addresses the unsolicited bid, reaffirming the company’s commitment to its mission:

“OpenAI is not for sale, and our job as a board is to exclusively decide what benefits our mission.”
[11:44]

Taylor emphasizes the nonprofit’s dedication to ensuring that artificial general intelligence benefits all of humanity, dismissing Musk’s bid as a distraction from OpenAI’s core objectives.

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Implications for the AI Industry: High Stakes and Strategic Positioning

The episode concludes with reflections on what Musk’s bid signifies for the broader AI landscape. Berber Jin highlights two main takeaways:

1. Public Drama in the Tech World:

   “There’s a sort of element of Shakespearean theater to all of this... the feud between these tech luminaries are spilling out into such public view.”
   [12:14]

2. Heightened Stakes in AI Development:

   “All of these business tycoons are angling for building artificial general intelligence... whoever develops the most sophisticated AI models first is going to go down in history as a tech visionary.”
   [12:14]

This underscores the intense competition and the transformative potential perceived in AI advancements, with major players vying for dominance and historical significance.

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Conclusion

The WSJ Tech News Briefing episode provides a comprehensive overview of the current tensions and strategic maneuvers within the AI sector, particularly focusing on Elon Musk’s audacious bid for OpenAI. Through insightful discussions with industry experts and reporters, the podcast sheds light on the complexities of AI governance, the interplay between open-source and proprietary technologies, and the high-stakes environment that defines today’s AI industry. For listeners seeking an in-depth understanding of these dynamics, this episode serves as an essential guide to the evolving narrative of artificial intelligence in both the corporate and defense arenas.

Transcript

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[Julie Chang]

It's Wednesday, February 12th. I'm Julie Chang for the Wall Street Journal. Artificial intelligence could be a powerful tool on the battlefield, but what happens when this tech is open sourced? Hear from the Department of Defense's first chief digital and AI officer on that. And then Elon Musk is leading a group of investors in a $97.4 billion bid to buy OpenAI's assets. What that could mean for the ChatGPT maker as it looks to transform to a for profit company first up, the rise of AI has brought Silicon Valley and the Department of Defense closer together as prominent AI startups like OpenAI and Anthropic partner with defense tech startups like Anduril and Palantir. So what could the emergence of Chinese AI firm Deepseek mean for the future of war? And how will Elon Musk's slashing government spending through the Department of Government government efficiency, or doge, impact the effort to acquire new tech? Craig Martel is the CTO of Cohesity, an IT company and the DoD's former chief digital and AI officer. At the WSJ CIO Network Summit this week, he sat down with WSJ reporter Heather Somerville to talk about that and more. Here's a snippet of their chat.

[Craig Martel]

Let's talk about Deepseak for a moment, the Chinese AI company that rattled US Markets and touted some very competitive large language models that it said it did with much less resources and much less money and much more quickly, which we.

[Heather Somerville]

Don'T know for sure.

[Craig Martel]

Which we don't know for sure. There's a lot of propaganda behind it, but there's also been a lot of technical testing as well. Nevertheless, in response, plenty in Washington have called for a different approach to export controls. Plenty in industry have said we need a better, more robust, better finance relationship between companies and government for a whole of country response on AI. I wonder what you think about how the United States confronts the reality that this is open source technology that is out there.

[Julie Chang]

Yep.

[Craig Martel]

And so how do you deal with that? With the policy tools that we have available to us?

[Heather Somerville]

Yeah, I don't think you can deal with the policy tools they have available to us. The policy thinking is based in the fact that you're the first one that builds the box. The box during the Manhattan Project was the bomb. And in that case the first one really did win. Whoever had the bomb first was going to be the hegemon for the second half of the 20th century. And that's still the mentality that folks have. Folks, I'm sorry this technology is out there. It is absolutely impossible to put this toothpaste back into the tube. Any of these stories that say that we have to lock things down seem to me to be fundamentally misguided because I don't know what you're locking down. Look, Llamas out there, what are you going to do? You're going to just go find every version of it? It's like saying we're going to stop Linux. It doesn't make any sense to me at all. So I actually think Deepseek is a win for open source versus closed more than it's a win for China over the us. I don't think that's the right story. The right story is, look what you can do. Meta did a great job. Llama's out there, and there's your $500 million project right there. If you only have to spend $5 million more to get something great out of it, that's wonderful. But that's a win for open source.

[Craig Martel]

So I got to take a minute on Doge because we got to talk about Doge. So the way I see, correct me if I'm wrong, part of your role in the DoD of as inaugural chief digital and AI officer was to bring some sense of efficiencies, modernization, speed through technology. That is the remit that Doge says it has to an extent. What I am wondering is they're talking about Doge coming from the Pentagon. That's been said. Do you think that the sledgehammer style of DOGE will be more effective in changing Pentagon procurement of new technology than some of the efforts that, for instance, you and other folks in your role undertook?

[Heather Somerville]

It's incumbent upon us to thread the needle between two very important things out. One is to be great stewards of the taxpayers money. And contrary to the public's default belief, almost every meeting I was ever in with the Secretary of Defense or the Deputy Secretary of Defense asked me the question, are we being good stewards with the American people's money? People really think hard about that. On the other hand. Imagine in your company, you take over a company and you're not allowed to rearrange the workforce right? Leaders should have the right to be able to rearrange the workforce in any way they want to, but we have to make sure we don't get rid of the talent necessary to do the job. It's a balance between doing the right thing with taxpayer money and keeping good talent around. The beauty of the bureaucracy is that it withstands the change of an administration that's non trivial. Withstanding the change of administration is non trivial. The bane for the rest of us about the bureaucracy. It withstands the change of administration and is there forever. What we tried to do is leverage pre existing headcount and open headcount to relabel it from non technical to AI technical. So we try to recode the billets to be AI technical ones. So instead of going into cutting things, we tried to reuse things more wisely.

[Julie Chang]

That was Craig Martel, CTO of cohesity and the DoD's former chief digital and AI Officer, speaking with WSJ reporter Heather Somerville at the WSJ CIO Network Summit this week. Coming up, the feud between Elon Musk and Sam Altman escalates. Musk strikes with an unsolicited bid for OpenAI. Stay tuned for that after the break.

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[Julie Chang]

OpenAI is governed by a non profit Board of directors and for some time CEO Sam Altman has been wanting to spin out the company and make the ChatGPT developer a for profit venture. The nonprofit entity would still exist. That process was already complicated. Then earlier this week, Elon Musk led a group of investors in a bid to buy the assets of OpenAI for $97.4 billion. That move puts pressure on Altman and could complicate things further for the startup. WSJ reporter Berber Jin has been covering the story and he joins us now with more. And we should note News Corp. Owner of the Wall Street Journal, has a content licensing partnership with OpenAI. Berber, bring us up to speed. What happened between Elon Musk and OpenAI's.

[Berber Jin]

Sam Altman in recent weeks, Musk came up with this idea kind of out of left field. No one saw it coming, which is to make an unsolicited bid to buy the nonprofit that controls OpenAI, the company. And it's one of the more astonishing things that I've covered in this whole saga unfolding between Sam and Elon, because we had known for a long time that Elon was upset about the nonprofit, that he was upset about the transition that OpenAI was making turning the nonprofit into a for profit company. He co founded OpenAI a decade ago as a nonprofit. He filed a series of legal complaints last year. They actually went to court earlier this year about this issue. But he kind of took it up another level by saying, if you're going to shortchange the nonprofit, then I'm going to make my own bid to basically buy the assets of the nonprofit myself. I'm going to determine what I think is the value of this nonprofit and.

[Julie Chang]

Why does this bid matter for Sam Altman?

[Berber Jin]

It puts Altman in a very tricky position. Because right now, OpenAI is undergoing a very tense, high stakes negotiation to turn its current structure, where a nonprofit governs a for profit subsidiary, turn that into a for profit company. So if you zoom back two years ago or three years ago, you remember this is the whole issue with Altman being fired. The fact that there was a nonprofit board that had a fiduciary duty to humanity, not to the company's shareholders. It was that convoluted structure that almost collapsed the company a few years ago. OpenAI has been spending a lot of time trying to make this transition work. A key question in these discussions is how to compensate the nonprofit. If the nonprofit is going to lose control of this incredibly valuable subsidiary, they have to be compensated in some way. The nonprofit is going to continue to exist after the transition. It just won't be governing this subsidiary. So that's a very complex question, because obviously control over the OpenAI business is enormously valuable. And OpenAI has to get approval from regulators in California and Delaware in order to make this transition. So when Musk says that he wants to buy the Nonprofit's assets for $97 billion, it throws a curveball to the nonprofit board because they're obligated to consider this offer. They have to act in the interest of the nonprofit mission and also ensure that the nonprofit is getting fairly compensated as a part of this transition. Even if they don't accept the bid, there might be a world in which it forces them to compensate the nonprofit more, give them a larger equity stake in the new for profit business, which shortchanges all the other investors, including Microsoft, potentially Altman himself, other investors and employees. So it's this kind of wrench that he's thrown in that make these transition talks more complex.

[Julie Chang]

How has Altman responded?

[Berber Jin]

So Altman responded quite quickly. He went on X and said we're not taking the bid. And he said, but we can buy Twitter for $9.74 billion, which is a very smart play with the decimals. He quipped on X that this wasn't going to happen. But we've reported that he also sent a slack message to his employees, basically outlining the fact that he doesn't think that Musk being very genuine with his bid, he thinks it's a political tactic. He makes the argument that Musk should be competing on a business level with his own startup, Xai.

[Julie Chang]

And in fact, Brett Taylor, the chairman of OpenAI said at the WSJ CIO Network Summit this week that the company isn't for sale.

[Brett Taylor]

OpenAI is a nonprofit. And what that means is the OpenAI board has a fiduciary duty to our mission exclusively. And our mission is to ensure that artificial general intelligence benefits all of humanity. So it's pretty simple for me, which is OpenAI is not for sale, and our job as a board is to exclusively decide what benefits our mission. And as a consequence, I think this is largely a distraction.

[Julie Chang]

So, Berber zooming out, does this tell us anything about the AI industry?

[Berber Jin]

It tells us two things. First, it kind of shows that there's a sort of element of Shakespearean theater to all of this. We haven't seen business drama play out like this where the sort of fights between these tech luminaries are spilling out into such public view. The second thing is that it also shows how high the stakes are. All of these business tycoons are angling for building artificial general intelligence. They all believe that AI is going to be this immensely transformative technological transition and that whoever develops the most sophisticated AI models first is going to go down in history as a tech visionary and also potentially be able to be at the forefront of a really huge economic transformation. That sort of accentuates all the drama.

[Julie Chang]

That was our reporter, Berber Jin. And that's it for Tech News Briefing. Today's show was produced by Jess Jupiter with supervising producer Katherine Millsop. I'm Julie Chang for the Wall Street Journal. We'll be back this afternoon with TNB Tech Minute. Thanks for listening.