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OpenAI's Legal Victory Over Musk: A Game Changer for Tech Investors

Wesley ParkTuesday, Apr 15, 2025 8:12 pm ET

43min read

Investors, buckle up. The legal battle between Elon Musk and OpenAI just took a dramatic turn—and it could reshape the entire AI landscape. California Attorney General Rob Bonta’s refusal to join Musk’s lawsuit against OpenAI isn’t just a legal setback; it’s a signal that Musk’s strategy to disrupt OpenAI’s pivot to a for-profit entity is hitting a wall. Let’s unpack why this matters for your portfolio.

The Legal Blow to Musk’s Campaign

On March 4, 2025, a U.S. District Court in California denied Musk’s request for a preliminary injunction to block OpenAI’s restructuring plans. This ruling, combined with Bonta’s decision to stay out of the lawsuit, is a massive win for OpenAI. The court found Musk’s claims—alleging antitrust violations and breaches of charitable trust—lacked sufficient evidence to justify halting the company’s shift to a for-profit structure.

The stakes are astronomical: OpenAI’s $40 billion fundraising round hinges on completing this transition by year-end 2025. If they fail, half the funds vanish. Musk, a co-founder who left OpenAI early, argues the move prioritizes profit over the nonprofit’s original mission. But Bonta’s office deemed Musk’s case too “personal” to warrant state involvement, even as over 50 nonprofits and labor groups lobbied for intervention.

Tesla’s stock, a proxy for Musk’s broader influence, has fluctuated wildly amid this feud. Shares dipped 8% in February 2025 after Musk’s $97 billion bid for OpenAI was rejected—a bid critics called a “hostile takeover ploy” to undermine OpenAI’s competition with Musk’s own xAI.

Why OpenAI’s Transition Matters for Investors

OpenAI’s pivot isn’t just about funding—it’s about survival in a cutthroat AI race. Competitors like Meta and Google are pouring billions into AI, and OpenAI’s for-profit model aims to secure the capital needed to stay ahead. Bonta’s hands-off stance removes a key legal hurdle, freeing OpenAI to focus on its $40 billion lifeline.

Microsoft, OpenAI’s largest investor, stands to gain the most. The tech giant’s $13 billion investment in OpenAI since 2019 has already boosted its Azure cloud business. With OpenAI’s valuation soaring to $300 billion, Microsoft’s stock could surge if the restructuring succeeds.

Microsoft’s shares have climbed 22% since OpenAI’s restructuring plans were announced in late 2024, reflecting investor optimism about its AI partnerships. Meanwhile, OpenAI’s valuation—now exceeding many Fortune 500 companies—hints at the sector’s explosive growth.

Musk’s Losing Battle?

Musk’s legal and financial gambits against OpenAI are backfiring. His $97 billion bid was dismissed as a “distraction” by OpenAI CEO Sam Altman, and the court’s rejection of his injunction request signals skepticism toward his motives. Musk’s critics argue he’s trying to cripple a rival to xAI, his own AI startup, which has struggled to gain traction.

This isn’t just about ego. Musk’s Tesla is also facing headwinds: its Full Self-Driving (FSD) software faces regulatory scrutiny, and its stock underperformed in 2024 as AI hype shifted toward cloud-based solutions like OpenAI’s.

The Regulatory Wildcard

While Bonta isn’t joining the lawsuit, he’s keeping a close watch. His office is investigating OpenAI’s handling of charitable assets, and a separate probe by the FTC could still loom. Investors should monitor how regulators balance innovation with accountability. A misstep here could derail OpenAI’s funding plans—and Microsoft’s stock.

Bottom Line: Ride the For-Profit Wave—or Bet on the Underdog?

This is a high-stakes gamble. OpenAI’s restructuring is a “bet the company” move, but its access to capital gives it a leg up. Musk’s legal crusade may distract from his own projects, while Microsoft’s OpenAI stake looks like a safer bet.

Investors should:
1. Buy Microsoft (MSFT): Its OpenAI ties and cloud dominance position it to profit from AI’s growth.
2. Watch OpenAI’s Fundraising: A successful $40B round could trigger a wave of AI partnerships and acquisitions.
3. Avoid Musk’s Overexposure: Tesla’s stock and xAI’s future depend on Musk’s ability to pivot—something he’s struggled with in the past.

The AI wars are intensifying, but right now, OpenAI’s legal clarity and deep-pocketed backers give it the edge. Musk’s lawsuit may be more about ego than economics. Investors, follow the money—not the headlines.

Final Call: OpenAI’s for-profit push is a Buy for tech investors. Musk’s tantrum? A Sell on sentiment alone.

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