Sam Altman’s OpenAI Weighs California Exit Amid State’s Scrutiny Of For-Profit Plan: Report

OpenAI executives are growing concerned that political scrutiny in California could hinder the company's proposed restructuring to a for-profit and have discussed moving out of the state as a last-ditch effort, according to a Wall Street Journal report on Monday.

The ChatGPT developer is currently controlled by a nonprofit, which requires it to comply with certain federal and state laws related to financing, governance, and public benefit, as well as regulatory oversight. 

The company's plan to convert to a for-profit company, first announced last year, has drawn pushback over fears that it would betray its nonprofit mission, weaken safety oversight, and violate charitable trust laws.

Elon Musk, a co-founder of OpenAI when it was established as a research company in 2015, and Mark Zuckerberg’s Meta Platforms Inc. have urged the blockage of the conversion, and attorneys general in California and Delaware are investigating the proposed plan.

Last week, the two attorneys general wrote to the company with concerns about its commitments to AI safety in light of new reports of recent suicides from people who had prolonged interactions with ChatGPT.

"The recent deaths are unacceptable. They have rightly shaken the American public's confidence in OpenAI and this industry," they wrote in the letter to OpenAI, as reported by the WSJ. "OpenAI — and the AI industry — must proactively and transparently ensure AI's safe deployment. Doing so is mandated by OpenAI's charitable mission, and will be required and enforced by our respective offices."

Executives didn't expect such intense public pushback for its restructuring plan, and the outcome of the California attorney general's investigation has been a particular concern, the WSJ report said, citing unnamed sources.

OpenAI has discussed potentially relocating out of California as a last-ditch option if the state's attorney general complicates the restructuring, according to the report. Such a move would be difficult, given that its AI researchers are heavily concentrated in San Francisco.

Failing to restructure could be a huge blow for OpenAI, potentially upsetting its fundraising and a potential public listing, as well as prompting investors to pull back some of the funds they have already committed.

In a response to the WSJ, an OpenAI spokesperson denied that the company plans to leave California.

On Stocktwits, the retail sentiment for OpenAI, which is not a public company, was 'bearish' as of the last reading.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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