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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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Why the Switch 2 is so important for Nintendo

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Why the Switch 2 is so important for Nintendo

Nintendo just released the Switch 2, its first new game console in eight years. The original Switch was wildly popular, selling 15 million units in its first year, more than any prior Nintendo console. The company says its was the second most successful console in its history.

The Switch also beat out the competition, topping consoles from Microsoft and Sony in first-year sales. Overall, it was only surpassed by the PlayStation 2, the best-selling console of all time.

“The Switch replaced both the historic Nintendo console and the historic Nintendo handheld,” says Michael Pachter, managing director at Wedbush Securities. “They’ve merged those two audiences, and the handheld audience got a massive trade up, and the console audience got a zero trade down.”

While Nintendo systems have often introduced bold new features, like Wii’s motion controls or the DS’ touch screen, the Switch 2 may be the company’s biggest bet yet: that consumers want more of the same. When the original Switch was released in 2017, it met the quality gamers expected from a home console on the go. The second iteration builds off the success of the innovative device, with a bigger screen, improved performance and a higher price tag at $450. 

Still, the Switch 2 sold out within minutes of pre-orders opening up. And fans lined up for hours ahead of the midnight release at Nintendo stores. The company says it expects to sell 15 million units of the new console in its first year.

“They’re probably not going to be in a position to meet initial demand,” said Clay Griffin, an analyst at MoffettNathanson. “I do think that they’ll be able to have success even at this higher price point…there’s enough demand that they should be fine.”

When asked what makes the Switch 2 a worthwhile upgrade, Nintendo of America President Doug Bowser told CNBC it’s about creating the next generation of gaming platforms that enhances the overall gameplay for consumers.

“With Switch 2, we’ve taken the things you know and love about Nintendo Switch, but then added very powerful gameplay features and social features,” he said.

Watch the video as CNBC’s Steve Kovach interviews the Nintendo of America President Doug Bowser and explores what’s next for the gaming giant.

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Meta forming new AI lab helmed by Scale AI CEO Alex Wang, report says

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Meta forming new AI lab helmed by Scale AI CEO Alex Wang, report says

Alexandr Wang, CEO of Scale AI, arrives for a meeting with international investors in IA at the Elysee Palace as part of the Artificial Intelligence (AI) Action Summit in Paris, France, Feb. 10, 2025. 

Gonzalo Fuentes | Reuters

Meta is forming a new artificial intelligence research lab and bringing on Alexandr Wang, the founder and CEO of the startup Scale AI, according to The New York Times.

The research lab is going to pursue a concept known as “superintelligence,” which is an AI system that surpasses human intelligence, The New York Times reported Tuesday. Meta is also in advanced talks to invest more than $10 billion in Scale AI, according to a report from Bloomberg.

Scale AI declined to comment. Meta did not respond to CNBC’s request for comment.

The reported research lab is Meta’s latest effort to gain an edge in the fiercely competitive AI development space. Meta has been pouring billions of dollars into the technology, announcing plans to spend as much as $65 billion in capital expenditures for AI infrastructure this year. 

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Late last month, Meta announced that its AI assistant supports one billion monthly active users across the company’s family of apps. In February, CNBC reported that Meta was planning to debut a stand-alone Meta AI app during the second quarter and test a paid-subscription service akin to rival chat apps such as OpenAI’s ChatGPT.

Shares of Meta were up about 1% on Tuesday.

Read the New York Times story here.

–CNBC’s Jonathan Vanian contributed to this report

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ChatGPT is down for some users with OpenAI reporting ‘elevated error rates’

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ChatGPT is down for some users with OpenAI reporting 'elevated error rates'

Jaque Silva | Nurphoto | Getty Images

ChatGPT was down for some users on Tuesday, with nearly 2,000 outage reports on Downdetector, a site that logs user reports of internet issues.

The artificial intelligence chatbot gave some users a “Too many concurrent requests” message, or would not answer questions.

The OpenAI status page showed “elevated error rates” ongoing for 7 hours.

“We are still working on implementing the mitigation for this issue,” the alert said. “We will continue to provide updates as progress is made.”

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OpenAI announced Monday that it reached $10 billion in annual recurring revenue (ARR). Last year, the company had around $5.5 billion in ARR but reported a loss of about $5 billion.

ChatGPT rolled out an update to Advanced Voice for paid users on Saturday. The feature improves “intonation and naturalness, making interactions feel more fluid and human-like,” according to the release notes.

This story is developing. Please check back for updates.

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