OpenAI executives are internally discussing relocating out of California as mounting regulatory resistance threatens the company's critical nonprofit-to-for-profit conversion, putting $19 billion in funding at risk. The discussions come as California's attorney general investigates whether the restructuring violates state law, while Meta and other rivals actively oppose the transformation that could reshape AI's biggest player.
OpenAI finds itself caught between a regulatory rock and a financial hard place, with company executives quietly exploring the nuclear option of abandoning California entirely. The discussions, reported by The Wall Street Journal, reveal how seriously the ChatGPT maker views the mounting opposition to its nonprofit-to-for-profit conversion - a transformation that $19 billion in investor commitments depends on.
California Attorney General Rob Bonta's office is investigating whether OpenAI's restructuring violates state charitable trust laws, adding legal uncertainty to what was already a complex corporate reorganization. The investigation comes as a powerful coalition including nonprofits, labor groups, philanthropies, and notably Meta pushes back against the conversion, arguing it sets a dangerous precedent for nonprofit organizations.
The stakes couldn't be higher. OpenAI's massive funding round, which valued the company at $157 billion, explicitly requires the successful completion of the for-profit conversion. If the restructuring fails, investors have the right to walk away entirely, creating an existential crisis for the AI leader that's burning through billions developing increasingly powerful models.
Meta's involvement in opposing the conversion adds a particularly sharp edge to the conflict. The social media giant, which has poured resources into competing AI models, stands to benefit if OpenAI faces organizational upheaval. The opposition coalition argues that allowing OpenAI to shed its nonprofit status while retaining assets built with tax-exempt donations would fundamentally undermine charitable trust law.
For CEO Sam Altman, the prospect of leaving California would represent a stunning reversal of fortune. Altman's Bay Area roots run deep - he served on San Francisco Mayor Daniel Lurie's transition team and reportedly owns at least four homes in San Francisco plus another in Napa Valley. The executive who once embodied Silicon Valley's AI ambitions now faces the possibility of taking his company elsewhere to survive.
