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OpenAI announces official plans to change into a for-profit company

OpenAI said Friday that in moving toward a new for-profit structure in 2025, the company will create a public benefit corporation to oversee commercial operations, removing some of its nonprofit restrictions and allowing it to function more like a high-growth startup.

“The hundreds of billions of dollars that major companies are now investing into AI development show what it will really take for OpenAI to continue pursuing the mission,” OpenAI’s board wrote in the post. “We once again need to raise more capital than we’d imagined. Investors want to back us but, at this scale of capital, need conventional equity and less structural bespokeness.”

The pressure on OpenAI is tied to its $157 billion valuation, achieved in the two years since the company launched its viral chatbot, ChatGPT, and kicked off the boom in generative artificial intelligence. OpenAI closed its latest $6.6 billion round in October, gearing up to aggressively compete with Elon Musk’s xAI as well as MicrosoftGoogleAmazon and Anthropic in a market that’s predicted to top $1 trillion in revenue within a decade.

Developing the large language models at the heart of ChatGPT and other generative AI products requires an ongoing investment in high-powered processors, provided largely by Nvidia, and cloud infrastructure, which OpenAI largely receives from top backer Microsoft.

OpenAI expects about $5 billion in losses on $3.7 billion in revenue this year, CNBC confirmed in September. Those numbers are increasing rapidly.

By transforming into a Delaware PBC “with ordinary shares of stock,” OpenAI says it can pursue commercial operations, while separately hiring a staff for its nonprofit arm and allowing that wing to take on charitable activities in health care, education and science.

The nonprofit will have a “significant interest” in the PBC “at a fair valuation determined by independent financial advisors,” OpenAI wrote.

How Sam Altman is tackling a growing threat to the future of OpenAI: Elon Musk

OpenAI’s complicated structure as it exists today is the result of its creation as a nonprofit in 2015. It was founded by CEO Sam Altman, Musk and others as a research lab focused on artificial general intelligence, or AGI, which was an entirely futuristic concept at the time.

In 2019, OpenAI aimed to move past its role as solely a research lab in hopes of functioning more like a startup, so it created a so-called capped-profit model, with the nonprofit still controlling the overall entity.

“Our current structure does not allow the Board to directly consider the interests of those who would finance the mission and does not enable the nonprofit to easily do more than control the for-profit,” OpenAI wrote in Friday’s post.

OpenAI added that the change would “enable us to raise the necessary capital with conventional terms like our competitors.”

Musk’s opposition

OpenAI’s efforts to restructure face some major hurdles. The most significant is Musk, who is in the midst of a heated legal battle with Altman that could have a significant impact on the company’s future.

In recent months, Musk has sued OpenAI and asked a court to stop the company from converting to a for-profit corporation from a nonprofit. In posts on X, he described that effort as a “total scam” and claimed that “OpenAI is evil.” Earlier this month, OpenAI clapped back, alleging that in 2017 Musk “not only wanted, but actually created, a for-profit” to serve as the company’s proposed new structure.

In addition to its face-off with Musk, OpenAI has been dealing with an outflow of high-level talent, due in part to concerns that the company has focused on taking commercial products to market at the expense of safety.

In late September, OpenAI Chief Technology Officer Mira Murati announced she would depart the company after 6½ years. That same day, research chief Bob McGrew and Barret Zoph, a research vice president, also announced they were leaving. A month earlier, co-founder John Schulman said he was leaving for rival startup Anthropic.

Altman said during a September interview at Italian Tech Week that recent executive departures were not related to the company’s potential restructuring: “We have been thinking about that — our board has — for almost a year independently, as we think about what it takes to get to our next stage,” he said.

Those weren’t the first big-name exits. In May, OpenAI co-founder Ilya Sutskever and former safety leader Jan Leike announced their departures, with Leike also joining Anthropic.

Leike wrote in a social media post at the time that disagreements with leadership about company priorities drove his decision.

“Over the past years, safety culture and processes have taken a backseat to shiny products,” he wrote.

One employee, who worked under Leike, quit soon after him, writing on X in September that “OpenAI was structured as a non-profit, but it acted like a for-profit.” The employee added, “You should not believe OpenAI when it promises to do the right thing later.”

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Microsoft enters portable gaming with new ROG Xbox Ally devices

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Microsoft enters portable gaming with new ROG Xbox Ally devices

Microsoft ROG Xbox Ally and Ally X Handheld devices

Source: Xbox

Microsoft Xbox players will soon be able to take their favorite games anywhere with the launch of the new ROG Xbox Ally handhelds.

This is a first for Xbox, which has never released a handheld before.

The devices, developed in collaboration with ASUS, offer a full-screen Xbox experience meant for portable play.

Players will be able to access Xbox games, stream content, and play on the go with built-in support for cloud gaming.

“Players can look forward to an approachable gaming experience that travels with you wherever you go, featuring several new and first-of-their kind features on both devices,” Microsoft said in a press release.

The announcement follows last week’s debut of Nintendo‘s flagship Switch 2 and sets the stage for a new chapter in portable gaming.

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Vantage raises $820 million in a first-of-its-kind cloud and AI data center deal in Europe

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Vantage raises 0 million in a first-of-its-kind cloud and AI data center deal in Europe

U.S. data center operator Vantage has raised 720 million euros ($821.4 million) — the first of its kind deal in Europe.

The asset-backed securitization (ABS) deal, the first ever euro-denominated with data center assets on the continent, involves four data centers in Germany.

The company said it will be paying on average a 4.3% coupon on the bonds issued through the process.

In an ABS, Vantage raises money by using its data center infrastructure and future revenues from the facilities as collateral.

Vantage said it will use the funds primarily to pay off existing construction loans previously secured for the facilities.

“We believe the ABS market in particular is kind of best suited for our type of asset, which is real estate centric, high credit quality tenants, long term leases, something that is almost perfect for the ABS investor,” Sharif Metwalli, chief financial officer of Vantage Data Centers, told CNBC.

Vantage added that despite the large sum borrowed, the demand from investors exceeded the amount raised.

“So this transaction was actually pretty highly levered, frankly,” Rich Cosgray, senior vice president of global capital markets at Vantage Data Centers told CNBC. “It was higher leverage than our prior transaction and we had some investors that just weren’t comfortable at that leverage level.”

“Yet, despite that, we were basically two and four times oversubscribed on the respective financings, and we were able to tighten pricing pretty meaningfully through the marketing process,” Cosgray added.

The four facilities — two in Berlin and two in Frankfurt — have access to around 55 megawatts of power and “are fully leased to hyperscale customers,” the company said in a statement. The four facilities were valued at more than $1 billion earlier this year.

Last year, Vantage also raised £600 million through the first-ever securitization of a data center in Europe, the Middle East and Asia (EMEA). The deal involved two units from the company’s Cardiff campus with 148 megawatts of electricity power. Across the region, the company has 2,500 megawatts of data center capacity either operational or under development.

The transaction was led by Barclays Bank and Deutsche Bank as joint lead managers and Vantage was represented by the British law firm Clifford Chance.

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IonQ buys UK quantum startup Oxford Ionics for more than $1 billion

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IonQ buys UK quantum startup Oxford Ionics for more than  billion

Cheng Xin | Getty Images

IonQ is buying United Kingdom-based quantum computing startup Oxford Ionics in a deal valued at nearly $1.1 billion.

Shares gained about 4%.

The companies said in a release that the deal will combine IonQ’s quantum computing hardware and software knowledge with Oxford Ionics’ semiconductor chip technologies. The company aims to deliver breakthroughs in the field and capitalize on growing revenue opportunities.

“We believe the advantages of our combined technologies will set a new standard within quantum computing and deliver superior value for our customers through market-leading enterprise applications,” said IonQ CEO Niccolo De Masi in a release.

The deal, which is expected to close this year, includes $1.065 billion worth of IonQ shares and about $10 million in cash. The merged company expects to build systems with 256 qubits by 2026, over 10,000 by 2027 and 2 million by 2030.

Interest in quantum computing has skyrocketed in recent months after technology giants Microsoft and Alphabet announced new chip breakthroughs. Experts tout the technology’s ability to solve intricate computing tasks unachievable by other computers.

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IonQ’s CEO previously told CNBC that he wants the company to become the “800-pound gorilla” in the quantum world.

Shares of Maryland-based company, which went public through a special purpose acquisition company in late 2021, are down about 6% year to date. The stock has soared more than 400% from a year ago.

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IonQ CEO on earnings: Leading the world in 'the quantum internet'

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