OpenAI's decision to remain under some form of nonprofit control is unlikely to appreciably slow its supercharged fundraising that has powered the startup's accelerated pace of developing and releasing advanced generative AI systems.
The move to suspend its quest to become a fully for-profit company also isn't likely to affect the ChatGPT creator's push to remain on top of the generative AI market with frequent releases of powerful new models and capabilities.
Meanwhile, as observers speculated about the motivation for retaining the unusual structure it has had since 2019, OpenAI said it will remain a nonprofit that controls a for-profit LLC, but that the LLC will become a public benefit corporation -- the same organizational format of rivals Anthropic and xAI. A public benefit corporation is chartered with a social mission.
However, OpenAI's intricate organizational structure, and now its move to a new kind of private makeup, could make it challenging for the vendor -- which has a market valuation of $300 billion -- to attract more investment at the rate and scale it needs to pay for compute resources and engineering talent.
Challenge to finances, but not serious
"This means their fundraising efforts are going to be a little harder," said R "Ray" Wang, founder of Constellation Research. "But they're still going to have that great valuation."
This means their fundraising efforts are going to be a little harder. But they're still going to have that great valuation.
R 'Ray' WangFounder, Constellation Research
"The decision not to convert itself into a for-profit company is likely based on its assessment that such a move, which has already been challenged in the courts, is not likely to clear legal and regulatory hurdles and is not likely to deter investors from making further investments," said Kashyap Kompella, founder of RPA2AI. "This decision doesn't mean that OpenAI has changed its stripes and has now become a charity. It also does not meaningfully alter its course, strategy or mission. Investors are also not likely to shy away from making fresh investments because of this tactical retreat."
OpenAI said in a May 5 news post that it has ended its mission to convert to a fully for-profit company -- which was challenged in court by xAI founder Elon Musk, among others -- after discussions with the attorneys general of California and Delaware. One theory about the OpenAI move is that the lawsuit by Musk, an original co-founder of OpenAI, had some influence.
Some confusion
"I don't know what investors will make out of this," said Andy Thurai, founder and analyst at The Field CTO. "Their structure is unclear."
"Their structure baffles me," said Mark Beccue, an analyst at Enterprise Strategy Group, now part of Omdia. "They will never raise the kind of money they want without some sort of path to ROI for investors."
Nevertheless, OpenAI has raised money at a torrid rate over the last two years. Last month, it concluded a $40 billion round led by SoftBank Group. In October 2024, it secured $6.6 billion from SoftBank, Nvidia and OpenAI partner Microsoft.
OpenAI said transitioning from an LLC to a public benefit corporation will not change its ambition to create artificial general intelligence, which would have the ability to think at human scale, for the service of humanity.
Wang said he will be closely watching what role OpenAI will play during President Donald Trump's scheduled visit to Saudi Arabia later this month, when Trump is expected to reveal $1.3 billion in investments in U.S. companies by the Middle Eastern power's government investment fund.
As for any threat to OpenAI's fundraising ability posed by its partial nonprofit status, the greater challenge is OpenAI's generative AI archrival, Google, according to Wang.
"They're basically under attack by Google, whose Gemini models are getting better and better," he said.
Shaun Sutner is senior news director for Informa TechTarget's information management team, driving coverage of artificial intelligence, analytics and data management technologies, and big tech and federal regulation. He is a veteran journalist with more than 30 years of news experience.
