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Billionaire Elon Musk Enters Courtroom Showdown with OpenAI

Elon Musk arrives at the 10th Breakthrough Prize Ceremony on April 13, 2024, at the Academy Museum of Motion Pictures in Los Angeles. (AP)
Elon Musk arrives at the 10th Breakthrough Prize Ceremony on April 13, 2024, at the Academy Museum of Motion Pictures in Los Angeles. (AP)
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Billionaire Elon Musk Enters Courtroom Showdown with OpenAI

Elon Musk arrives at the 10th Breakthrough Prize Ceremony on April 13, 2024, at the Academy Museum of Motion Pictures in Los Angeles. (AP)
Elon Musk arrives at the 10th Breakthrough Prize Ceremony on April 13, 2024, at the Academy Museum of Motion Pictures in Los Angeles. (AP)

Jury selection is to begin Monday in a high-profile legal battle between billionaire Elon Musk and artificial intelligence startup OpenAI, which he accuses of betraying its non-profit mission.

The clash in a courtroom across the bay from San Francisco pits the world's richest man against a startup that Musk once backed and now competes against in the booming AI sector.

OpenAI's ChatGPT is a formidable rival to the Grok chatbot made by Musk's xAI lab.

While the lawsuit filed by Musk is part of a feud between him and OpenAI chief executive Sam Altman, it spotlights a debate whether AI should ultimately benefit the privileged few or society as a whole.

Court filings lay out how Altman tried to convince Musk to back OpenAI in 2015, acting as a co-founder for a non-profit lab whose technology "would belong to the world."

Musk pumped some $38 million into the lab before he left.

OpenAI is now valued at $852 billion, with Microsoft among its backers, and is preparing to go public on the stock market.

The judge presiding over the trial is aiming for a jury to decide by late May whether OpenAI broke a promise to Musk in its drive to be a leader in AI or just smartly rode the technology to glory.

- Musk duped? -

Musk argues in his lawsuit that he was deceived about OpenAI's mission being altruistic.

The tycoon cites an email from Altman in 2017 claiming that he remained "enthusiastic about the non-profit structure" of their AI venture after Musk threatened to cut off funding for the lab.

Just a few months later, however, OpenAI established a commercial subsidiary in the face of needing to invest hundreds of billions of dollars in data centers to power its technology.

Over the course of the following two years, Microsoft pumped billions of dollars into OpenAI and the tech stalwart's stake in the startup is now valued about $135 billion.

Microsoft chief executive Satya Nadella is among those slated to testify at the trial.

- Aimed at Altman -

Along with calling for OpenAI to be forced to revert to a pure nonprofit, Musk's suit urges the ousting of Altman and OpenAI co-founder and president Greg Brockman.

Musk is also seeking as much as $134 billion in damages and to have the court make OpenAI sever ties with Microsoft.

During pre-trial hearings, US Judge Yvonne Gonzalez Rogers mused that Musk team seemed to be "pulling numbers out of the air" when it came to calculating damages.

If the jury sides with Musk, it will be left to Rogers to determine any remedies or payment.

In what OpenAI has dismissed as a public relations stunt, Musk has vowed that any damages awarded in the suit will go to the startup's nonprofit foundation.

- Quest for control? -

OpenAI internal communications brought to light by the lawsuit reveal tensions that culminated with the temporary ouster of Altman as AI chief executive in late 2023.

Musk's legal team highlighted a 2017 entry in Brockman's personal journal reasoning that it would be lying if Altman publicly asserted OpenAI would stay a nonprofit but became a corporation a short time later.

OpenAI now has a hybrid governance structure giving its nonprofit foundation control over a for-profit arm.

In court filings, OpenAI countered that its break-up with Musk was due to his quest for absolute control rather than its nonprofit status.

"This case has always been about Elon generating more power and more money for what he wants," OpenAI said in a post on X, a platform Musk owns.

"His lawsuit remains nothing more than a harassment campaign that's driven by ego, jealousy and a desire to slow down a competitor."

The startup noted that days after Musk entered the AI race in 2023 he called for a 6-month moratorium on development of advanced AI.

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Technology

Microsoft's Cloud Growth, Cash Flow Offer Respite from AI Spending Fears

FILE PHOTO: The logo of Microsoft at the 10th edition of the VivaTech technology startups and innovation fair in Paris, France, June 18, 2026. REUTERS/Gonzalo Fuentes/File Photo
FILE PHOTO: The logo of Microsoft at the 10th edition of the VivaTech technology startups and innovation fair in Paris, France, June 18, 2026. REUTERS/Gonzalo Fuentes/File Photo
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Microsoft's Cloud Growth, Cash Flow Offer Respite from AI Spending Fears

FILE PHOTO: The logo of Microsoft at the 10th edition of the VivaTech technology startups and innovation fair in Paris, France, June 18, 2026. REUTERS/Gonzalo Fuentes/File Photo
FILE PHOTO: The logo of Microsoft at the 10th edition of the VivaTech technology startups and innovation fair in Paris, France, June 18, 2026. REUTERS/Gonzalo Fuentes/File Photo

Microsoft on Wednesday delivered a big cash flow beat and forecast strong cloud growth, offering fresh evidence that its hefty AI bets were paying off even as concerns mount over Big Tech's spending spree.

The results underscore a widening financial divide among the industry's biggest AI spenders, as soaring infrastructure costs force some rivals to turn more heavily to capital markets.

Microsoft's shares rose more than 3% in after-hours trading. The company posted market-beating 48% growth in its Azure cloud business in its fiscal first quarter ended September, and generated $18.6 billion in free cash flow — some $10 billion more than analysts expected.

That financial firepower set the maker of the Windows operating system apart from rivals such as Alphabet and Meta, whose heavy AI investments have squeezed free cash flow and increased their reliance on borrowing.

Alphabet reported negative free cash flow of $9.07 billion in the third quarter as capital spending jumped and growth in its core ad business slowed, overshadowing a doubling of its cloud sales and sending its shares down 8% in extended trading. Meta last week posted its first cash burn in more than ⁠a decade, and said ⁠it planned to issue new stock to fund its growing capital costs.

"Microsoft's first-quarter report was about as clean as it gets for a company this size," said Jesse Cohen, senior analyst at Investing.com. "After Meta's and Alphabet's numbers revived AI-spending anxiety, this is the counterweight. Demand still exceeds supply, the commercial backlog is enormous, and returns are finally showing up in earnings and overall revenue."

The results also showed Microsoft capitalizing on corporate demand for AI, easing fears that the technology threatens its software empire and that its AI fortunes are too closely tied to unprofitable OpenAI. Still, its ties to the AI lab netted it $10 billion in revenue in the September quarter.

Microsoft shares have risen about 9% so far this year compared with a 13% rise in the S&P 500 ⁠index.

Microsoft's five-year credit default swaps — a measure of perceived default risk — remain the tightest among the largest tech companies, according to Truist, even as spreads have widened across much of the AI trade.

Reuters said that CEO Satya Nadella has sought to capture enterprise demand by giving customers cheaper options, as businesses grapple with the rising cost of deploying AI.

On a conference call with analysts, Nadella said the company was giving customers a range of AI options, some of them at lower cost than cutting-edge AI models such as Anthropic. The company is trying to make its Copilot products more useful with each model release by "consolidating the frontier gains for broad deployment," he added.

Last month, Microsoft said it would disclose Azure revenue in dollars, instead of just growth rates, offering a clearer picture of how its cloud business stacks up against rivals Amazon Web Services and Google Cloud.

Revenue at Microsoft's Azure cloud computing business grew to $33.17 billion in the quarter, topping Visible Alpha's estimate of $32.84 billion. Overall revenue rose by a fifth to $92.28 billion, and an adjusted profit of $4.89 per share beat an average estimate of $4.73 a share.

The company expects second-quarter Azure growth of 49% to 50%, above analyst estimates ⁠of 47.6%, according to Visible Alpha ⁠data. It forecast total sales of $96 billion to $97.1 billion, above estimates of $95.6 billion, according to LSEG data.

Capital expenditure for the quarter rose to $45.2 billion from $34.9 billion in the year-ago period, but came in below the company's own projection of $50 billion. So far in calendar 2026, Microsoft's capital expenditure has been $118.1 billion, which means it would have to spend $56.9 billion in the final three months of the year to hit its own forecast of $175 billion given in July.

Jonathan Neilson, Microsoft's vice president of investor relations, attributed the lower-than-expected capital expenditure to delays rather than any changes to the company's underlying spending plans.

"We did see some third-party capacity deliveries that we expected in first quarter were actually delayed," Neilson said.

Earlier on Wednesday, hyperscaler Oracle said it expects capital spending to peak this fiscal year and next, but pledged to raise no more than $20 billion in additional financing for AI through fiscal 2030.

Overall, Big Tech is expected to pump more than $700 billion this year into building data centers and securing the hardware and energy needed to develop and run AI technologies.

While faster revenue growth at these companies indicates their bets could be paying off, concerns over the cost of financing the outlay have heightened over the past few weeks.

Shrinking cash flows and rising debt loads at US tech companies, including recent stress at neocloud company CoreWeave as well as record-high costs to insure Meta's debt against default, have added to market turmoil.

Technology

Apple Shows First Touchscreen Laptops Amid Product Blitz

The Apple Inc logo is seen at the entrance to the Apple store in Brussels, Belgium November 28, 2022. (Reuters)
The Apple Inc logo is seen at the entrance to the Apple store in Brussels, Belgium November 28, 2022. (Reuters)
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Apple Shows First Touchscreen Laptops Amid Product Blitz

The Apple Inc logo is seen at the entrance to the Apple store in Brussels, Belgium November 28, 2022. (Reuters)
The Apple Inc logo is seen at the entrance to the Apple store in Brussels, Belgium November 28, 2022. (Reuters)

Apple CEO John Ternus unveiled the company's first touchscreen MacBooks on Wednesday, abandoning a long-held aversion to the technology as it caps a burst of product launches ahead of the holiday shopping season.

Ternus, a former Apple hardware veteran and the company's new CEO, took the stage at an Apple event in Los Angeles, part of a media blitz filled with new product launches.

He launched a folding iPhone, Duo, at Apple's Silicon Valley headquarters in September and a smart home hub in New York earlier this month. While those ‌products will test ‌new markets for Apple, the Los Angeles event ‌could ⁠rekindle an old question: should ⁠Apple put the touchscreens that it made mainstream in iPhones and iPads in its oldest product line?

Apple executives long resisted the idea, with Steve Jobs saying in 2010 that touchscreens on laptops were "ergonomically terrible" and then-CEO Tim Cook saying in 2012 that such devices would be as pleasing to users as converging a toaster and a refrigerator.

Before becoming Apple's ⁠latest CEO, Ternus argued that Apple already made a touchscreen ‌computer with its iPad lineup.

But touchscreens ‌have been widely available for more than a decade on Windows devices, ‌and with the iPhone nearing its two-decade anniversary, a new generation of ‌buyers expects screens to respond to touch.

"I believe they were always wrong on pushing back on touch, and this is the long arm of reality setting in," said Anshel Sag, an analyst at Moor Insights & Strategy. "Some things are purely ‌inevitable."

A key question for Apple is how customers will respond. The company has seen an uptick in ⁠Mac sales, ⁠but much of that growth has been among technology enthusiasts and businesses buying the machines to handle AI tasks on-device.

While Apple this week announced an upgraded base model of its MacBook Pro with a new M6 chip, Bloomberg News has reported that it plans to ship touchscreen models with its existing M5 Pro and M5 Max chips that already come in MacBook Pro models, meaning the new machines would not gain a significant performance boost over existing ones.

"The only thing people want is more memory and better processors for local models!" prominent tech commentator Jason Calacanis, the host of the All-In Podcast, wrote on X.

Technology

Data Center Next Door Divides Old Massachusetts Mill Town

This aerial photo shows the Markley Lowell Data Center surrounded by residential neighborhood homes and apartment buildings in Lowell, Massachusetts, on October 15, 2026. (Photo by Lauren Owens Lambert / AFP)
This aerial photo shows the Markley Lowell Data Center surrounded by residential neighborhood homes and apartment buildings in Lowell, Massachusetts, on October 15, 2026. (Photo by Lauren Owens Lambert / AFP)
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Data Center Next Door Divides Old Massachusetts Mill Town

This aerial photo shows the Markley Lowell Data Center surrounded by residential neighborhood homes and apartment buildings in Lowell, Massachusetts, on October 15, 2026. (Photo by Lauren Owens Lambert / AFP)
This aerial photo shows the Markley Lowell Data Center surrounded by residential neighborhood homes and apartment buildings in Lowell, Massachusetts, on October 15, 2026. (Photo by Lauren Owens Lambert / AFP)

Retiree Eileen Castle hasn't been able to enjoy her backyard since a data center moved in next door in Lowell, Massachusetts, bringing noise, fumes, dust and water mist.

But a few streets away, contractor Louis Haas is grateful to Markley, the company running the facility, for redeveloping an abandoned site he says was rife with drug use.

Dubbed "the Dungeon" by some locals for the imposing black silhouette it casts over a residential neighborhood of this old milling city, those opposing views encapsulate how data centers are polarizing communities across the United States.

Republican-governed states, with their looser regulations, host most of the country's current AI build-out. But in liberal-leaning New England, some feel betrayed by their elected representatives, while others fear being left behind if the industry is curbed.

- 'Nothing but noise' -

Over the din of construction behind a spiked fence, Castle, 82, told AFP her great-great-grandparents bought the property.

But since the data center moved into a disused pasta factory a decade ago, "We have had nothing but noise.

We have dust, dirt. We have all kinds of mist" from the adjoining cooling towers, which she fears could carry Legionnaires' disease.

Noxious fumes made a long interview outdoors impossible, and she lamented that her grandchildren can no longer swim in her small pool.

"I think every once in a while that maybe I should sell my house," she says, but adds her property value has plummeted.

"The Markley Group serves more than 600 clients in Massachusetts and connects the digital infrastructure that powers our economy, our schools, and the everyday needs of our community," Markley Group CEO Jeff Markley said in a statement to AFP.

The company said its backup diesel generators run only for five minute tests each week and, thanks to abatement efforts, produce "about 44 decibels of sound, quieter than a soft conversation three feet away."

It said it tests its water twice a year for Legionnaires', and has planted 2,000 trees.

In 2015, the city council gave Markley a 20-year property and personal property tax break estimated at $77 million, the Lowell Sun newspaper reported at the time.

Enthusiasm has since cooled. In March, the council unanimously passed a 360-day moratorium on construction and expansion of commercial data centers, though Markley's 352,000-square-foot site was grandfathered in.

Residents represented by the Conservation Law Foundation (CLF) and others have sued to challenge its expansion, which included increasing the number of generators to 27, and won a temporary injunction in August.

CLF attorney Adam Reynolds told AFP that it is the "compounding effect of pollution that's really significant" in a historically industrial area.

- Community divisions -

Markley has supporters. Haas, 50, who supplies coffee to a major tech company, said the boom had been good to contractors like him.

"I'm a big liberal, I'm a Democrat. But I'm also pro-jobs and pro-economy," he told AFP.

Markley said it employs more than 100 full-time staff in Lowell, a third of them local. On top of that, over 100 unionized trades workers work on campus.

Another backer, Sarah Bibeau, a 43-year-old single mother of two who works in the defense sector, told AFP the company had been "kind and considerate," fixing roads and offering favors ranging from yard work to free Red Sox tickets.

Detractors include Jake Fortes, a 44-year-old travel agent who founded the group "Honest Future for Lowell" and whose property sits on the fence line.

"We're getting steamrolled by this company. So some of us have taken it to task," Fortes told AFP.

Like Castle, he feels let down by Democrats, including state Governor Maura Healey -- who signed a sales tax break for data centers into law but then paused new applications this year, a reversal that illustrates the party's dilemma.

Luz Marte, a 38-year-old lab technician, bought her house a year ago, without realizing the site was a data center.

"It sounds very loud, like an airplane is going to take off," she told AFP as her three-year-old son played.

Her home insurer recently moved to triple her premium, which she believes is linked to Markley buying a building even closer to her property.

"This is a home I bought for my son, to grow up, feel alive, and have a future," she said. "Now I'm doubting that idea."