A lot changed this week at OpenAI. Elon Musk calls it a 'facade.'

It’s been a busy week for AI upstart OpenAI (OPAI.PVT). The company abandoned plans to convert itself into a for-profit enterprise and appointed Instacart CEO Fidji Simo as its new head of applications. It also reached an agreement to purchase AI coding tool Windsurf for $3 billion, according to Bloomberg.

It’s a lot of change in such a short period of time, and the moves leave a number of unanswered questions about OpenAI’s future. What’s more, they’ve done little to shake the ire of OpenAI’s nemesis and onetime co-founder, Elon Musk, who’s staying the course with a legal war against the company’s attempted restructuring.

All of this comes as OpenAI finds itself beset by challengers both in the US and abroad, including the likes of Perplexity, DeepSeek, and Musk’s own X.ai — and as incumbents such as Google (GOOG, GOOGL) work to ensure they’re not left by the wayside.

OpenAI was founded as a nonprofit in 2015 but added a for-profit arm that reported to the nonprofit in 2019. It was structured so that the for-profit subsidiary, technically owned by a holding company owned by OpenAI employees and investors, remained under the control of the nonprofit and its board of directors while giving its biggest backer, Microsoft (MSFT), no board seats and no voting power.

OpenAI had hoped to shed its nonprofit status to attract additional investors and renegotiate with existing ones. But the company said on Monday that it abandoned those plans after hearing from “civic leaders and engaging in constructive dialogue with the offices of the Attorney General of Delaware and the Attorney General of California.”

Instead, the company will turn its for-profit arm into a public benefit corporation (PBC). OpenAI’s nonprofit will control and be a large shareholder of the PBC, giving it a more traditional capital structure where stakeholders receive stock. The new PBC, OpenAI said, would not be constricted by profit caps that currently limit profits for outside investors. Under its current structure, profits exceeding the caps are returned to the nonprofit.

Musk argues that OpenAI’s new for-profit venture is a “facade” and a “PR announcement” meant to obscure company executives’ looting and profiteering off the nonprofit.

Musk claimed in a court document filed on Wednesday that his former partner in charity, OpenAI co-founder Sam Altman, scrapped the for-profit business plan to hide misappropriated donations.

Sam Altman, co-founder and CEO of OpenAI, testifies before a Senate Committee on Commerce, Science, and Transportation hearing on Capitol Hill on May 8. (AP Photo/Jose Luis Magana) · ASSOCIATED PRESS

“By all indications, OpenAI’s latest announcement, conveniently made right after the court set Plaintiffs’ core claims for trial, is a facade concealing defendants’ prior looting of the charity and ongoing profiteering from it,” a lawyer for Musk said in a motion to dismiss OpenAI’s counterclaims against Musk.

Musk went on to allege that OpenAI’s new plan to simultaneously convert its for-profit LLC to a PBC and remove previous profit caps placed on outside investments was evidence of OpenAI and Altman’s untoward actions.

“This is already evidenced by the simultaneous announcement that OpenAI has removed all previous profit caps on outside investment, and that the tens of billions of dollars in investment expressly conditioned on its for-profit conversion will now vest…”

OpenAI responded to Musk’s comments, telling Yahoo Finance, “Elon continuing with his baseless lawsuit only proves that it was always a bad-faith attempt to slow us down.”

Microsoft, which invested $13.75 billion in OpenAI’s for-profit arm, dCeline’s to comment on OpenAI’s entity change announcement. Bloomberg reported on Tuesday that Microsoft had not signed off on the restructuring plan. TechCrunch reported that OpenAI has considered minimizing Microsoft’s cut of OpenAI’s revenues from 20% to 10% by 2030.

OpenAI’s newest executive, Fidji Simo, is set to join the company later this year as she wraps up her tenure as CEO of Instacart. According to Altman, Simo will head up OpenAI’s Applications segment and “focus on enabling our ‘traditional’ company functions to scale as we enter a next phase of growth.”

Simo was already serving on OpenAI’s board ahead of the announcement, which Altman said he moved up due to a leak.

Fidji Simo arrives at the 11th Breakthrough Prize Ceremony on April 5 in Los Angeles. (Jordan Strauss/Invision/AP) · Jordan Strauss/Invision/AP

Simo is taking the role at a time when OpenAI is facing ever-increasing competition from rival generative AI companies. It’s not just upstart AI firms, though. OpenAI also has to contend with Google and its Gemini AI models. The company already offers its AI Overviews at the top of certain search results pages and has opened up its AI Mode to Google Labs users in the US.

AI Mode, like ChatGPT search, offers a chat-like interface that users can use to ask questions and follow-up queries as part of an ongoing conversation.

Simo will have to ensure that OpenAI continues to evolve its various offerings at a regular cadence to keep from falling behind its contemporaries.

As part of that effort, OpenAI purchased AI-powered developer tool Windsurf, pushing it further into new markets. By grabbing Windsurf, OpenAI now has a software platform that can assist engineers as they write code, speeding up development time.

Despite OpenAI’s early mover status, the generative AI field is still wide open, and the company’s latest moves prove it’s striving to keep its leadership position. But generative AI is still relatively new, and there’s no telling which companies will stick around and which will fall to the wayside.