Elon Musk introduced his new firm xAI which he says has the aim to grasp the true nature of the universe.
Jaap Arriens | Nurphoto | Getty Images
When Elon Musk created his synthetic intelligence startup xAI in 2023, he integrated it as a Nevada public benefit company, making a proper dedication to positively influence society and to submit common disclosures about progress on its non-financial targets.
The launch of xAI adopted Musk’s break up with OpenAI, which he helped begin eight years earlier as a nonprofit earlier than the AI lab went on to take billions of {dollars} from Microsoft en path to changing into a large enterprise.
Musk’s spat with OpenAI took a authorized flip early final yr, when he sued the AI startup and CEO Sam Altman for breach of contract, alleging they deserted the corporate’s founding mission to develop AI “for the benefit of humanity broadly.” As a part of his lawsuit, Musk sought to block OpenAI from changing right into a for-profit entity.
Meanwhile, xAI modified its personal construction, terminating its PBC status, in response to information on file with Nevada’s secretary of state.
Nevada public information present that as of May 9, 2024, xAI’s distinction as a PBC was gone. And when xAI merged with X (previously Twitter) earlier this yr, the mixed firm remained with out its PBC construction, in response to its articles of incorporation, dated March 28.
Representatives from xAI did not reply to requests for remark.
A month after shedding its PBC designation, xAI started utilizing dozens of pure fuel generators to energy its information heart in Memphis, Tennessee, the place the corporate trains and processes the info behind its Grok chatbot. While xAI, and its provider, Solaris Energy Infrastructure, initially promised to make use of air pollution controls with the generators, these have not but materialized.
The firm’s operations in Memphis have added to air air pollution woes within the area, in response to analysis by scientists on the University of Tennessee in Knoxville.
The NAACP is suing xAI, alleging the corporate dedicated Clean Air Act violations.
Executives at Legal Advocates for Safe Science and Technology (LASST), which first obtained the Nevada public information, mentioned that xAI seems to have registered as a PBC when it was useful for publicity, however then deserted the excellence with out telling the public.
“Once you start funneling billions of dollars into an industry, and follow what is strictly a profit motive, sometimes the better angels take a back seat,” LASST packages director Vivian Dong advised CNBC.
LASST CEO Tyler Whitmer mentioned his nonprofit works to carry AI corporations accountable for the guarantees they make to customers, buyers and regulators, and pushes them to be clear in regards to the security dangers of their AI know-how and insurance policies.
Over the final yr, xAI has been embroiled in controversy not only for its environmental influence, but in addition due to the output of its Grok chatbot.
Grok is each a standalone app and is tightly built-in into X in addition to in Tesla infotainment techniques.
This yr, Grok has generated and unfold hateful and false content material throughout X together with antisemitic posts, reward for Hitler and false claims about alleged “white genocide” in South Africa. Grok has additionally unfold climate change denial speaking factors.
When Musk’s firm launched a brand new model of the mannequin underlying its chatbot, Grok 4, on July 9, it did so with out making any particulars out there about related guardrails or security testing earlier than the rollout.
Competitors together with OpenAI, Google DeepMind and Anthropic, which is a Delaware PBC, have printed disclosures about their security testing and the guardrails they’re putting in round new releases earlier than pushing them out. However, corporations throughout the trade have confronted criticism for an inadequate quantity of give attention to AI security, privateness and the environmental influence of information facilities that prepare and run AI fashions.
After CNBC despatched a number of requests for data to xAI in July and August about its security practices, the corporate updated its “model card” for Grok 4 on Aug. 20, offering some details about its testing and guardrails. That was virtually two months after its launch.
Why Nevada?
Michal Barzuza, a legislation professor at University of Virginia and a company legislation and governance professional, advised CNBC that an organization centered on being accountable to stakeholders would not select to include in Nevada, the place state legal guidelines make it onerous for shareholders to sue companies, administrators and officers.
That means “less litigation, but it also means less to no accountability,” mentioned Barzuza.
A benefit company in Nevada is a for-profit authorized construction that formally acknowledges an organization’s dedication to creating optimistic impacts, alongside its monetary targets. Establishing a enterprise as a PBC within the state probably presents authorized protections to officers and administrators who prioritize broader targets, however would not include many different obligations, Barzuza mentioned.
XAI hasn’t delivered annual stories on its environmental and social influence that may in any other case be anticipated by a PBC beneath Nevada’s statute.
Musk’s retreat from PBC status has been so secretive that even his lawyer seemed to be unaware of the change. As lately as May 2025, in an amended grievance that is a part of the case in opposition to OpenAI, Musk’s lawyer, Marc Toberoff, wrote that xAI is “a public benefit corporation founded by Musk to help accelerate scientific research via AI.”
The submitting says Musk was suing OpenAI partly to “ensure that competition in the marketplace for generative AI remains healthy and that AI development proceeds in a safe and responsible manner for all stakeholders and society at large.”
Toberoff did not reply to requests for remark.
Also in May, OpenAI bowed to strain from civic leaders and ex-employees, asserting in a blog post that its nonprofit would retain management of the corporate even because it restructures right into a PBC.
Public disclosures from the big AI mannequin corporations have gotten extra essential as their utilization expands deeper into the patron and enterprise markets and bigger piles of cash pour into the area from buyers.
WATCH: Elon Musk says he has no plans to merge Tesla with xAI
