TL;DR
Satya Nadella testified in the Musk v. Altman trial that he feared Microsoft would become “the next IBM,” revealing that the $13B OpenAI investment was a survival bet backed by a $92B return projection, not a commitment to the nonprofit mission.
Satya Nadella told a federal jury on Monday that he feared Microsoft would become “the next IBM” while OpenAI became the next Microsoft. The admission, drawn from an April 2022 internal email presented by Elon Musk’s lead attorney, reveals the strategic anxiety that drove the largest corporate investment in artificial intelligence history. Microsoft did not put 13 billion dollars into OpenAI because it believed in a nonprofit mission to develop safe AI for the benefit of humanity. It invested because its CEO believed the company would become irrelevant if it did not.
A January 2023 memo from Microsoft president Brad Smith to the company’s board, also presented to the jury, projected a 92 billion dollar return on that cumulative investment, with a 20 per cent annual escalator starting in 2025. The document reframes the Microsoft-OpenAI partnership from a technology collaboration into what may be the largest financial hedge in corporate history: a bet by the world’s most valuable software company that it could not survive the AI era on its own.
The email
The IBM analogy is not casual. In the 1980s, IBM built the personal computer and outsourced the operating system to a small software company in Redmond, Washington. That decision made Microsoft and unmade IBM. Nadella was telling his team that the same dynamic was forming in AI. OpenAI was building the reasoning engine. Microsoft was building the cloud infrastructure. If OpenAI became the platform and Microsoft became the commodity, the company that defined enterprise software for four decades would fade into the same irrelevance as the company that defined enterprise hardware for three.
Musk’s attorneys presented the email to suggest that Microsoft’s investment was commercially motivated from the beginning, undermining OpenAI’s nonprofit origins. Nadella’s response was to defend the partnership as mutually beneficial. But the email speaks for itself. The CEO of Microsoft was not writing about advancing AI safety. He was writing about survival.
The return
Brad Smith’s 92 billion dollar projection landed on the Microsoft board’s desks one month before the company publicly announced its expanded 10 billion dollar investment in OpenAI. The memo included a 20 per cent annual escalator from 2025, meaning the projected return would compound as OpenAI’s models became more commercially valuable. At the time, ChatGPT had been public for less than two months.
The financial calculus was straightforward. Microsoft was the exclusive cloud provider for OpenAI’s models and held exclusive commercial rights to resell them through Azure. Every dollar of OpenAI revenue flowed through Microsoft infrastructure. The 13 billion dollars was not a donation to a nonprofit. It was a down payment on a distribution monopoly for the most important technology of the decade.
OpenAI is now valued at 852 billion dollars. Microsoft holds 27 per cent of the for-profit entity that emerged from the October 2025 conversion. The nonprofit foundation that was supposed to govern the technology retains 26 per cent. The alignment between mission and money that OpenAI’s founders promised has been replaced by a cap table.
The blind spots
Under cross-examination, Nadella acknowledged that he was not aware of any full-time employees at the OpenAI nonprofit before March 2026. He could not identify any grants, research, or open-sourced technology the nonprofit had produced. He was not informed in advance that the board planned to fire Sam Altman in November 2023. He was never given clarity on why Altman was removed.
The admissions paint a portrait of a partnership in which the investor knew everything about the commercial operation and nothing about the nonprofit governance. Musk’s legal team wants the jury to conclude that the nonprofit was a shell. Nadella’s testimony does not contradict that framing. It reinforces it from the perspective of the company that had the most to gain from the commercial side.
The witnesses
The trial has spent three weeks accumulating testimony that dismantles every participant’s stated motives. Greg Brockman, OpenAI’s co-founder and president, disputed Musk’s account of the startup’s early days and testified that Musk had OpenAI employees do secret work on self-driving technology at Tesla. Brockman’s own journals, presented as evidence, contained entries that called the nonprofit mission “a lie”, undermining both Musk’s claim that the mission was sacred and OpenAI’s claim that it was preserved.
Former board members Helen Toner and Natasha McCauley testified that Altman was untrustworthy, withheld information from the board, and sometimes lied. McCauley told the jury the board had “buckets of concerns” about Altman’s leadership, including an incident in which Altman falsely claimed that OpenAI’s legal department had cleared the GPT-4 Turbo launch in India without safety board review. The women who fired Altman in November 2023 told the jury why, and their reasons had nothing to do with Musk’s lawsuit.
The admissions
Musk took the stand during the trial’s first week and told the jury that OpenAI’s leaders had duped him into bankrolling the company. He repeated a phrase that became the trial’s refrain: “You can’t just steal a charity.” He argued he was not opposed to a small for-profit arm funding the nonprofit but lost trust in Altman when he learned about Microsoft’s 10 billion dollar investment, texting Altman in late 2022: “What the hell is going on? This is a bait and switch.”
Then came the question about distillation. Asked whether xAI uses OpenAI’s models to train Grok, Musk said it was a general industry practice. Asked whether that meant yes, he replied: “Partly.” The admission that his own AI company copies the technology he claims was stolen from a charity drew audible gasps in the courtroom. Musk told the jury the case would set a precedent for “looting every charity in America” while simultaneously acknowledging that he was using the charity’s output to build a competitor.
Shivon Zilis, a former OpenAI board member and the mother of four of Musk’s children, testified that Musk tried to recruit Altman to lead a new AI lab at Tesla. He offered Altman a Tesla board seat. He asked Andrej Karpathy to send a list of top OpenAI researchers to poach. The man suing for breach of charitable trust was, according to the testimony of his own witness, actively trying to strip the charity of its leadership and talent.
The defence
Altman took the stand on Monday. He testified that Musk’s departure from OpenAI’s board in 2018 was a “morale boost” for some employees because Musk had demotivated key researchers by ranking their accomplishments. Altman told the jury that Musk left because he lost confidence in the project and wanted long-term control that the other founders would not grant him.
In a tense exchange, Musk’s attorney confronted Altman with a text message he sent Musk on 18 February 2023: “I’m tremendously thankful for everything you’ve done to help. I don’t think that OpenAI would have happened without you.” The implication was that Altman privately acknowledged Musk’s contribution while publicly diminishing it. The text was sent three months after Musk learned about the Microsoft investment and seven months before the board fired Altman.
The trial began with 150 billion dollars at stake over whether OpenAI’s conversion from nonprofit to for-profit corporation was a breach of charitable trust. Musk wants the court to unwind the conversion, oust Altman and Brockman, and direct damages to the nonprofit. OpenAI argues Musk is suing because he wanted control of the most valuable AI company in the world and did not get it.
The hedge
While the trial plays out in Oakland, Microsoft is quietly proving that Nadella learned the IBM lesson. Microsoft dropped its exclusive licence to OpenAI’s technology, retaining only a non-exclusive agreement through 2032. It did so voluntarily, which makes sense only if Microsoft no longer needs exclusivity because it has alternatives.
It does. Microsoft launched three in-house AI models that directly challenge the partner it spent 13 billion dollars cultivating. The company that feared becoming IBM responded by doing what IBM never did: building its own operating system before the partner could lock it out. Nadella’s April 2022 fear that Microsoft would become dependent on OpenAI appears to have been the founding anxiety of an entire corporate strategy designed to ensure it never would.
The trial is expected to continue through 21 May before Judge Yvonne Gonzalez Rogers. The jury will decide whether OpenAI’s leaders breached a charitable trust and whether Musk is owed restitution. But Nadella’s testimony has already answered a different question. The most powerful corporate backer of the nonprofit AI mission invested because he was afraid his company would die without it. The 92 billion dollar return projection was not a byproduct of the partnership. It was the point. The nonprofit wrapper that Musk claims was stolen may never have contained what any of the parties involved believed it did.
