When Elon Musk founded his artificial intelligence startup xAI in 2023, he registered it as a public benefit corporation in Nevada, formally committed to making a positive impact on society, and regularly disclosed progress on its non-financial goals. Before launching xAI, Musk parted ways with OpenAI. Musk helped found OpenAI eight years ago as a nonprofit, and the artificial intelligence lab has since received billions of dollars in funding from Microsoft as it grew into a massive enterprise.
Musk's spat with OpenAI erupted into a legal dispute early last year, when he sued the artificial intelligence startup and its CEO Sam Altman for breach of contract, claiming they abandoned the company's founding mission to develop artificial intelligence "for the broad benefit of humanity." As part of the lawsuit, Musk seeks to prevent OpenAI from transforming into a for-profit entity.
At the same time, xAI changed its structure and terminated its PBC status, according to Nevada filing records.
Nevada public records show that as of May 9, 2024, xAI’s status as a PBC no longer exists. When xAI merged with X (formerly Twitter) earlier this year, the combined company still did not have a PBC structure, according to its March 28 articles of incorporation.
A month after relinquishing its PBC status, xAI began using dozens of natural gas turbines to power its data center in Memphis, Tennessee, where the company trains and processes the data behind its Grok chatbot. While xAI and its supplier Solaris Energy Infrastructure initially promised to use pollution controls on the turbines, those measures have yet to materialize.
Research by scientists at the University of Tennessee, Knoxville, shows the company's operations in Memphis are exacerbating the region's air pollution problems.
The NAACP sued xAI, accusing the company of violating the Clean Air Act.
Executives with the Legal Advocacy for Safe Science and Technology (LASST), which first obtained Nevada public records, said xAI appears to have registered PBC when it was helpful for publicity but later dropped that distinction without informing the public.
LASST CEO Taylor Whitmer said his nonprofit is committed to holding AI companies accountable for the promises they make to users, investors and regulators, and pushing them to be transparent about the security risks of AI technology and policies.
Over the past year, xAI has been embroiled in controversy not only for its impact on the environment, but also for the output of its Grok chatbot.
Grok is both a standalone app and an app with infotainment systems that is tightly integrated with X and Tesla.
This year, Grok created and spread hateful and false content on X, including anti-Semitic posts, praise for Hitler, and false claims about the so-called "white genocide" in South Africa. Grok also spreads climate change denialism.
On July 9, Musk's company released a new version of its chatbot Grok 4, but did not provide any details about related guardrails or safety testing before the release.
Competitors including OpenAI, Google DeepMind and Delaware PBC company Anthropic have released information about their security testing and the guardrails they put in place around new versions before launching them. However, companies across the industry have faced criticism for not paying enough attention to AI security, privacy, and the environmental impact of the data centers that train and run AI models.
Michael Barzuza, a University of Virginia law professor and expert on corporate law and governance, said a company focused on being accountable to its stakeholders would not choose to register in Nevada because Nevada law makes it difficult for shareholders to sue the company, directors and officers.
Barzuza said that means "less litigation, but it also means less liability or even no accountability."
Under Nevada regulations, PBC is required to submit an annual report on XAI's environmental and social impacts.
Musk's move to give up his PBC status has been so secretive that even his lawyers seemed unaware of the change. As recently as May 2025, Musk’s lawyer Marc Toberoff wrote in an amended complaint that xAI was “a public benefit corporation founded by Musk to help accelerate scientific research through artificial intelligence.” The complaint is part of the OpenAI case.
The filing states that Musk is suing OpenAI in part to "ensure that competition in the generative AI market remains healthy and that AI development is conducted in a safe and responsible manner for all stakeholders and society at large."
Also in May, OpenAI bowed to pressure from civic leaders and former employees, announcing in a blog post that its nonprofit would retain control of the company even as it reorganized into PBC.
Public disclosures from large AI modeling companies are becoming increasingly important as their use reaches deeper into consumer and commercial markets and investors pour more money into the space.