OpenAI to remove non-profit control and give Sam Altman equity

Accenture's AI business takes centre stage in quarterly results beat

FE Team | Published: September 27, 2024 00:53:13

Sam Altman

SAN FRANCISCO, Sept 26 (Reuters): ChatGPT-maker OpenAI is working on a plan to restructure its core business into a for-profit benefit corporation that will no longer be controlled by its non-profit board, people familiar with the matter told Reuters, in a move that will make the company more attractive to investors.
The OpenAI non-profit will continue to exist and own a minority stake in the for-profit company, the sources said. The move could also have implications for how the company manages AI risks in a new governance structure.
Chief executive Sam Altman will also receive equity for the first time in the for-profit company, which could be worth $150 billion after the restructuring as it also tries to remove the cap on returns for investors, sources added. The sources requested anonymity to discuss private matters.
"We remain focused on building AI that benefits everyone, and we're working with our board to ensure that we're best positioned to succeed in our mission. The non-profit is core to our mission and will continue to exist," an OpenAI spokesperson said.
The details of the proposed corporate structure, first reported by Reuters, highlight significant governance changes happening behind the scenes at one of the most important AI companies. The plan is still being hashed out with lawyers and shareholders and the timeline for completing the restructuring remains uncertain, the sources said.
The restructuring also comes amid a series of leadership changes at the startup. OpenAI's longtime chief technology officer Mira Murati abruptly announced her departure from the company on Wednesday. Greg Brockman, OpenAI's president, has also been on leave.
Founded in 2015 as a non-profit AI research organization, OpenAI added the for-profit OpenAI LP entity in 2019 as a subsidiary of its non-profit, securing capital from Microsoft to fund its research.
The company captured global attention with the launch of ChatGPT in late 2022, a generative AI app that spit out human-like responses to text queries, which has become one of the fastest-growing applications in history with over 200 million weekly active users, igniting a global race to invest in AI.
Along with ChatGPT's success, OpenAI's valuation has skyrocketed from $14 billion in 2021 to $150 billion in the new convertible debt round under discussion, attracting investors such as Thrive Capital and Apple.
The company's unusual structure, which gives full control of the for-profit subsidiary to the OpenAI nonprofit, was originally set to ensure the mission of creating "safe AGI that is broadly beneficial," referring to artificial general intelligence that is at or exceeding human intelligence.
The structure came into focus last November during one of the biggest boardroom dramas in Silicon Valley, where members of the non-profit board ousted Altman over a breakdown in communication and loss of trust. He was reinstated after five days with overwhelming support from employees and investors.
Since then, OpenAI's board has been refreshed with more tech executives, chaired by Bret Taylor, former Salesforce co-CEO who now runs his own AI startup. Any corporate changes need approval from its nine-person non-profit board.
The removal of non-profit control could make OpenAI operate more like a typical startup, a move generally welcomed by its investors who have poured billions into the company.
However, it could also raise concerns from the AI safety community about whether the lab still has enough governance to hold itself accountable in its pursuit of AGI, as it has dissolved the superalignment team that focuses on the long-term risks of AI earlier this year.
It's unclear how much equity Altman will receive. Altman, already a billionaire from his multiple startup investments, has previously stated that he chose not to take an equity stake in the company because the board needed a majority of disinterested directors with no stake in the company. He has also said he has enough money and is doing it because he loves the work.
The new structure of OpenAI would resemble that of its major rival Anthropic and Elon Musk's xAI, which are registered as benefit corporations, a form of for-profits that aim to promote social responsibility and sustainability in addition to making profits.
Meanwhile, IT services major Accenture unveiled a $4.0 billion share buyback on Thursday, closing the fourth quarter with better-than-expected results thanks to strong demand for its services that help businesses adopt generative AI technology.
Accenture's generative AI business has been outpacing the growth in its other core businesses, as organizations look for automation to curtail costs and improve efficiency.
Generative AI bookings have shown robust quarter-on-quarter acceleration for the past four quarters, reaching a total of $3 billion for the year.
Shares of Accenture rose 3.3 per cent before the bell, rebounding from a near 4 per cent decline over the year. The tech-heavy Nasdaq, on the other hand, rose 20.4 per cent this year.
Excluding items, the company earned $2.79 per share, beating estimates of $2.78 per share, according to LSEG data.
However, the company's forecast for growth between 3 per cent and 6 per cent missed the midpoint of the analysts' average estimate of 5.9 per cent growth.
While analysts expect a turnaround in IT services, the expectations for next year remain modest. Analysts at JP Morgan earlier said they were not as bullish for the sector as they were this time last year, adding that clients will continue to withhold discretionary spending on projects.
Ahead of Accenture's results, Morgan Stanley said that overall IT services demand will likely be generally slower than expected in the coming quarters.