OpenAI lawyer William Savitt grilled Elon Musk about his commitment to a nonprofit and discussions about a for-profit subsidiary.

Musk mentioned he had concerns about the nonprofit being “stolen” in 2018.

Musk stated Microsoft’s $10 billion investment in the nonprofit was a tipping point and he lost trust in Sam Altman by late 2022.

Musk mentioned he “was a fool” for giving OpenAI and Altman the funding that was then used to create an $800 billion business.

Jared Birchall, who manages Musk’s family office and is also an executive at xAI and Neuralink, will be next to testify.

Elon Musk continued his testimony on Wednesday in the high-profile trial in his lawsuit against OpenAI CEO Sam Altman taking place in federal court in Oakland, California.

Musk sued OpenAI, Altman and Greg Brockman, the company’s president, two years ago, alleging they reneged on their commitments to preserve the artificial intelligence lab’s nonprofit structure. Musk, who co-founded OpenAI in 2015, claims the roughly $38 million he contributed to the corporation was used for unauthorized commercial purposes that did not advance its charitable mission. 

Steven Molo, Musk’s lawyer, kicked off the proceedings on Wednesday by asking Musk questions about his understanding of OpenAI’s corporate structure and his relationships with OpenAI executives.

After Molo concluded his questioning, OpenAI’s attorney, William Savitt, began his cross-examination. Savitt did not finish his questioning, which means Musk will return to the stand on Thursday.

Musk left OpenAI’s board in 2018 after a number of disagreements with Altman and Brockman about the company’s direction, including a failed effort to merge it with Tesla.

Following Musk’s departure, OpenAI established a for-profit subsidiary that allowed it to raise the capital it needed to develop its digital systems more easily. 

During his testimony on Wednesday, Musk again expressed that he is not outright opposed to the idea of a for-profit subsidiary, as long as the for-profit is not the “tail wagging the dog.” He added that he was not concerned by a capped-profit structure, but he did take issue with an uncapped structure.

“They should not get rich off a nonprofit. That’s not right,” Musk mentioned from the stand.

Musk mentioned he “was a fool” for donating $38 million to OpenAI, which he stated was used to turn it into an $800 billion organization.

During his cross-examination, Musk clashed with Savitt on several occasions. He accused the attorney of lying and asking misleading questions. Some exchanges got heated, and both Musk and Savitt raised their voices during the proceedings.

“Your questions are not simple, they are designed to trick me, essentially,” Musk told OpenAI’s lawyer.

Savitt told Judge Yvonne Gonzalez Rogers that he expects to continue his cross-examination of Musk for roughly one more hour on Thursday. Once Musk’s testimony concludes, his attorneys will call their next witness, Jared Birchall, who manages Musk’s billions at his family office. Brockman is also expected to testify on Thursday.

CNBC’s reporters covered Wednesday’s proceedings from the courtroom, as well as from CNBC’s bureaus in San Francisco and Englewood Cliffs, Latest Jersey.

Judge Gonzalez Rogers is speaking with lawyers from both camps

Judge Gonzalez Rogers is speaking with lawyers representing Musk and OpenAI.

Savitt is raising how difficult it has been for him to get answers out of Musk.

“That is the challenge of all litigants,” Gonzalez Rogers responds.

— Ashley Capoot

OpenAI lawyer says Musk doesn’t know about the AI company’s safety efforts

In a tense exchange, Savitt implied that Musk doesn’t possess the internal knowledge of OpenAI’s safety efforts to generate an assessment of the company’s safety profile.

“You just don’t know,” Savitt remarked in his cross-examination.

Musk mentioned he did not know what OpenAI may be doing with respect to safety. But, he noted, “It does worry me that a nonprofit suddenly is a for-profit with unlimited profit.”

Savitt asked, “Does a for-profit AI corporation create a safety risk?” Musk replied, “Yes, I think it creates a safety risk,” noting that his assertion included his own AI business, xAI.

Savitt also asked Musk about his knowledge of “safety cards.” Musk mentioned he was not sure what a “safety card” is.

Safety cards are documents AI companies publish alongside major model releases that detail capabilities, risks and safety testing.

— Lora Kolodny and Jeffrey Kopp

Court recesses for the day, Musk to return to the stand tomorrow

Court proceedings have concluded for the day, and Musk just left the stand. Judge Gonzalez Rogers gave the jury strict orders not to discuss the case with anyone.

Musk’s cross-examination will continue Thursday. Once he wraps up, Jared Birchall, who manages Musk’s billions at his family office, will testify next.

Gonzalez Rogers is now speaking with lawyers from both sides about the objections that came up during Musk’s testimony.

Musk’s testimony will likely continue into Thursday

Savitt just mentioned he has roughly another hour and a half of questions for Musk, meaning his testimony will likely continue into Thursday.

Court is supposed to recess for the day at 1:40 p.m. PT — in 20 minutes.

Musk spars with OpenAI’s attorney about whether he read a document

Musk and Savitt, OpenAI’s attorney, are having a heated exchange about whether Musk read a term sheet from several years ago.

Savitt says Musk made no mention in any of his depositions about having read the term sheet. During his testimony today, Musk remarked he read the very first part of the term sheet, basically just to get a grasp of the high-level details.

He tells Savitt that during his depositions, he tried to expressed he didn’t look closely at the term sheet, not that he didn’t read it.

The exchange about the term sheet is lasting for several minutes. It’s the most animated Musk has been during his testimony so far.

Members of the jury look tired

Musk’s cross examination is getting into the nitty-gritty details of OpenAI’s founding and corporate structure. Members of the jury look tired, and several are fidgeting. One juror keeps closing her eyes.

— Ashley Capoot and Kate Rooney

Musk continues to spar with OpenAI’s attorney over questioning

Proceedings are back underway and Musk continues to clash with OpenAI’s attorney, Savitt, about his approach to questioning.

After Savitt noted he was asking Musk a simple question, Musk fired back, “Your questions are definitionally complex, not simple. It is a lie to say they are simple.”

Savitt pressed Musk over his general wish to wield control over his companies, including Tesla and SpaceX. Musk and the lawyer sparred over the details of his current versus future ownership of Tesla, including stock options reported in his financial filings.

—Ashley Capoot and Lora Kolodny

Court is in recess, Musk’s cross examination will resume after the break

Everyone has filed out of the courtroom for a quick break, including Musk, Altman and Brockman.

Musk’s cross-examination will resume when the court is back in session.

OpenAI’s lawyer was asking Musk about his ambition to build an AI “robot army” just before the break. Musk noted that he did not mean an army in a military sense.

OpenAI lawyer asks Musk about for-profit discussions with Altman, others

Savitt probed Musk about the discussions he had with Altman, Brockman and Ilya Sutskever about establishing a potential for-profit subsidiary.

Savitt pulled up exhibits that highlight Musk’s intended control of the majority of the capitalization table and board seats.

Musk pushed back on Savitt’s questions and stated repeatedly that his control over the corporation and its board would fall over time. He remarked he would have to meet the demands of future investors, who would demand board seats.

OpenAI lawyer questions how dedicated Musk was to a nonprofit

Savitt asked Musk about meetings he had with Altman, Brockman, and Shivon Zilis, who is a venture capitalist and the mother of several of Musk’s children.

Savitt alleged that Musk made overtures to convert OpenAI into a for-profit corporation and asked Musk if he instructed Zilis to file paperwork to do so. Musk noted he doesn’t recall.

“You were never really committed to OpenAI being a nonprofit, were you, Mr. Musk?” asked Savitt, counsel for OpenAI.

“No, what you’re saying is false,” Musk replied.

—Jeffrey Kopp

Musk grilled about his contributions to OpenAI

William Savitt questioned Elon Musk about his contributions to OpenAI, asking him to confirm that his donations amounted to $38 million, which fell shy of the “up to $1 billion” Musk had offered the non-profit.

“Without me, OpenAI wouldn’t exist!” Musk mentioned, raising his voice as Savitt probed him about the funds.

“I contributed my reputation!” Musk commented, adding that he named the firm. “These things all have value.”

Savitt also asked Musk if OpenAI used funds donated by him to pay rent at the Pioneer Building, which Musk had leased and which was also used by his other enterprise, Neuralink.

“You were on the hook for the entire lease, weren’t you?” the lawyer asked. Musk remarked yes, but he would have found another sub-tenant if he had not rented it out to OpenAI.

Musk maintained that “$38 million is still a lot of money” and the value of his contributions to OpenAI were worth much more.

—Lora Kolodny

Musk and OpenAI’s lawyer clash in cross-examination

Musk and OpenAI’s lawyer, William Savitt, butted heads early in the cross-examination.

Savitt repeatedly asked Musk not to stray from the direct, narrow questions he is asking. Musk replied that Savitt’s questions are not straightforward.

“Your questions are not simple. They are designed to trick me, essentially,” Musk mentioned.

He then shared an example of a kind of yes/no question that would be unfair to him, stating, “Have you stopped beating your wife?” The judge stopped him and moved the proceedings along.

Inside the courtroom

The courtroom is packed to the brim, and I’m seated on a wooden bench toward the front of the room with other members of the media.

The court is in recess right now, but things should get back underway shortly. Musk is sitting at a table with his lawyers, which is covered in laptops, binders, cables and bottles of water.

Altman and Brockman just took their seats a few feet away. Altman is holding a modest notebook and a pen. All three men are wearing a suit and tie, just like they were on Tuesday.

Musk explains why he waited so long to file a lawsuit

Musk tried to explain why he waited so long to file his lawsuit, saying that thinking someone might steal your car is not the same thing as someone actually stealing your car.

Musk remarked he had some concerns back in 2018, but that they didn’t materialize until later.

“I would’ve filed a lawsuit sooner if I thought they’d stolen the charity sooner,” Musk testified. This also touches on aspects of bull market.

Musk commented Microsoft’s stake was a tipping point and he lost trust in Altman by late 2022

Musk remarked that Microsoft’s $10 billion investment in OpenAI was the key tipping point that made him believe OpenAI was violating its nonprofit mission. He remarked the size of that investment was too large to be a traditional donation, and that he believed Microsoft was looking for a financial return.

Musk commented Microsoft has its own motivations, which would be different from the motivations of the charity.

“All due respect to Microsoft, do you really want Microsoft controlling digital superintelligence?” Musk asked.

After Microsoft made its donation, Musk noted he asked for a legal investigation into OpenAI.

“By late 2022, I’d lost trust in Altman and I was concerned that they were really trying to steal the charity,” Musk noted. “It turned out to be true.”

Musk texted Altman directly about Microsoft’s $10 billion investment

Musk testified about how he reacted the moment he became aware of Microsoft’s $10 billion investment in OpenAI in the fall of 2022.

“I reacted quite negatively because at a $10 billion scale, there’s no way Microsoft is just giving that as a donation or any kind of charitable way. That’s an amount of funds that doesn’t construct any sense,” Musk mentioned.

“I texted Sam Altman and stated, ‘What the hell is going on?’ – something to that effect,” Musk noted. “I think I commented, ‘This is a bait and switch.'”

Musk says xAI is still minor compared to OpenAI

Musk noted his newest venture, xAI, is working on artificial general intelligence and estimated that about a dozen other companies are also doing so, along with OpenAI.

He noted he started xAI as a “standard c-corp,” in 2023 because “that’s how I created all my other companies except for OpenAI,” and a for-profit cannot be turned into a non-profit.

xAI was founded initially as a Nevada benefit corp, CNBC has previously reported, but the corporation dropped its PBC status and attached commitments in 2024.

Musk noted that xAI, which was acquired by SpaceX, has “very insignificant economy share” today and is only technically a competitor to OpenAI, but is “much smaller” than the ChatGPT maker.

Musk says OpenAI and its leaders ‘can’t have your cake and eat it too’

Musk has repeatedly mentioned that OpenAI and its executives can’t “have your cake and eat it too.” He says they can’t have all the excellent associations of being a nonprofit, while also reaping the monetary benefits of its for revenue.

“They should not get rich off a nonprofit, that’s not right,” he noted on the stand.  

Musk noted he “actually was a fool” who donated $38 million to the nonprofit, which was then used to create an $800 billion for-profit firm.

Musk says ‘it’s possible’ he called anyone at OpenAI a ‘jackass’

Musk’s attorney asked him if he ever called anyone at OpenAI a “jackass” or otherwise used language that offended employees.

“It’s possible,” Musk stated, then claimed, “I don’t lose my temper. I don’t yell at anyone.”

Famously mercurial as CEO of Tesla and SpaceX, Musk then added that “sometimes you have to utilize language that gets citizens out of their comfort zone,” which he commented he would only do in circumstances when employees or colleagues were making choices that could be “fatal” or “damage” a firm.

Musk touts his recruiting power to land talent at OpenAI

Musk’s lead counsel, Steve Molo, read emails to the jury sent by OpenAI’s Ilya Sustkever and Greg Brockman to Musk, flattering and thanking him for supporting their careers and work at OpenAI.

Musk, on the stand, boasted about his recruiting power and how valuable this was for OpenAI.

“When you have someone like Ilya, who is one of the greatest computer scientists in the globe, you can work anywhere you want,” Musk noted.

He added that the reason he’s been able to build successful companies, like Tesla and SpaceX, was that “extremely talented, excellent the public want to work with me.”

Musk, Altman and Brockman arrive in court

Musk, Altman and Brockman have entered the courtroom.

An attorney for OpenAI was just up speaking in front of the judge, and she remarked that Brockman has been given a 48 hour notice to testify. That means he could be called as soon as tomorrow, depending on how long Jared Birchall’s testimony lasts.

Day 3 crowd enters the courtroom and is taking their seats

I just took my seat inside the courtroom. There’s a long line of media, attorneys and members of the public waiting outside.

There’s no sign of Musk, Altman or Brockman yet. Lawyers and members of the press are chatting quietly before the proceedings get underway.

How is the trial structured?

Before the trial got underway, Judge Gonzalez Rogers opted to split it into two sections. 

The first phase of the trial is called the liability phase, where Gonzalez Rogers will determine whether OpenAI, Altman and Brockman engaged in any wrongdoing. The nine-person jury will weigh in during this phase only, and its verdict will be advisory. That means Gonzalez Rogers will have the final word.

If the OpenAI camp is found at fault, the trial will proceed to a remedies phase, where Gonzalez Rogers will hear arguments about what the outcomes and next steps should be. Musk has asked for a range of remedies since he filed the lawsuit, ranging from billions of dollars in “wrongful gains” to the removal of Altman and Brockman from their roles at OpenAI. 

Musk’s lawyers stated they will call Jared Birchall as next witness

Musk’s lawyers told Gonzalez Rogers that their next witness will be Jared Birchall, who manages Musk’s billions at his family office, Excession LLC. Birchall also holds executive roles at some of Musk’s companies, including xAI and Neuralink.

During his testimony on Tuesday, Musk commented Birchall handled his wire transfers to OpenAI.

What are the claims in the trial?

Musk’s lawyers have centered their arguments in the trial around two claims: Breach of charitable trust and unjust enrichment. 

The breach of charitable trust claim is key. Musk’s lawyers will try to prove that the roughly $38 million Musk donated to OpenAI established a charitable trust, which required OpenAI to remain a nonprofit and open-source organization forever. 

The unjust enrichment claim builds on that idea. Musk’s lawyers will argue that OpenAI, Altman and Brockman used the $38 million for unauthorized commercial purposes that did not align with the company’s charitable mission. In other words, they will try to prove that OpenAI reaped improper benefits from Musk’s early contributions. 

During opening arguments on Tuesday, Savitt, OpenAI’s attorney, laid the groundwork to refute those claims. He mentioned Musk, who founded a competing AI startup in 2023, doesn’t actually care about any of these issues, he cares about “winning.” 

“We are here because Mr. Musk didn’t get his way at OpenAI,” Savitt told the jury.

Microsoft is also named as a defendant in the lawsuit, which means that lawyers for the business are participating in the trial as well. 

Musk accuses Microsoft of aiding and abetting OpenAI’s alleged breach of charitable trust. Russell Cohen, an attorney for Microsoft, stated during his opening statements on Tuesday that the firm had no knowledge of any breach, and that Musk could have easily raised any concerns with Microsoft CEO Satya Nadella directly.

3 takeaways from Musk’s testimony on Tuesday

Musk testified for nearly two hours on Tuesday. Here are the main ideas he discussed.

Musk stated he got inspired to start OpenAI because he grew concerned that Google was not taking AI safety seriously. He remarked he got into an argument with Google co-founder Larry Page, who called Musk a “speciesist for being pro-human.” Musk decided he wanted to establish a firm that could serve as a “counterweight” to Google.

Musk stated he brainstormed several ideas with Altman and Brockman about how to fund the charity. He was open to the idea of establishing a modest for-profit subsidiary, but he stated he does not think it is acceptable for the for-profit to take the vast majority of the value away from the charity.

Musk mentioned he would not have dedicated his time and resources to OpenAI if he knew the other founders intended to construct a revenue. “I came up with the idea, the name, recruited the key individuals, taught them everything I know, provided all the initial funding,” he testified.