Elon Musk's AI War With OpenAI Explained As Rift Intensifies, Lands In Court

What began as a simmering feud between Elon Musk's xAI and OpenAI has escalated into a full blown legal war. Musk's firm accused OpenAI of stealing proprietary technology and poaching key staff. OpenAI has vehemently denied these claims but the legal war between the two tech giants is only intensifying.

xAI's Allegations Against OpenAI

Elon Musk's xAI has accused OpenAI of orchestrating a coordinated campaign to lure xAI engineers and thereby gain access to confidential information about its AI chatbot Grok. This reportedly includes source code, design models and data centre expertise.

According to reports, xAI said, 'OpenAI is targeting those individuals with knowledge of xAI's key technologies and business plans including xAI's source code and its operational advantages in launching data centres, then inducing those employees to breach their confidentiality and other obligations to xAI through unlawful means.'

The complaint also claims OpenAI induced former xAI employees, such as Xuechen Li, early engineer Jimmy Fraiture, and an unnamed senior finance executive, to violate confidentiality obligations and hand over trade secrets. However, these claims remain under dispute.

xAI further asserts that OpenAI sought not just code, but strategic insight into how xAI builds, scales and operates its infrastructure, especially the rapid deployment of data centres. The filing includes dramatic accusatory language, 'By hook or by crook, OpenAI clearly will do anything when threatened by a better innovator, including plundering and misappropriating the technical advancements, source code, and business plans of xAI.'

In an earlier legal action, xAI targeted Xuechen Li individually, alleging that he copied confidential files from his xAI laptop onto an external device, deleted logs and altered file names to conceal his tracks before joining OpenAI. xAI claimed that the leaked files contained 'cutting-edge AI technologies with features superior to those offered by ChatGPT and other competing products.'

The company is now seeking monetary damages and a restraining order to bar Li from working at OpenAI.

OpenAI Fights Back Against xAI and Elon Musk

OpenAI did not remain silent. On 2 October 2025, it filed a motion to dismiss xAI's alleged trade secret suit, calling the allegations 'baseless' and labelling Musk's legal approach an 'ongoing harassment' campaign. OpenAI argues that xAI employees are free to change employers and that it retains the right to recruit talent from competitors. The company further insists it has no interest in misappropriated secrets.

OpenAI contends that the lawsuit is a means to shift attention away from xAI's internal difficulties, 'The truth is that xAI is hemorrhaging talent to other competitors, including OpenAI.'

This legal clash is part of a larger escalation between the two tech giants. Musk has previously sued OpenAI over its shift from a non-profit to a for-profit model, while OpenAI has countered with claims of harassment.

Additionally, xAI has filed a separate suit against Apple, accusing it of colluding with OpenAI to suppress competition in the App Store. Apple and OpenAI have jointly sought dismissal of that case.

Battle of the Bots

This confrontation is not merely legal but symbolic in many ways. Musk was once a co-founder and among OpenAI's earliest backers, but the relationship has since seemingly soured. Earlier in 2025, Musk's xAI-led group made a $97.4 billion (approximately £80.2 billion) bid to acquire OpenAI. OpenAI's board rejected the offer outright, stating the company was not for sale.

Beyond the courtroom, the dispute underscores the intense race for next-generation AI. Grok, xAI's chatbot, and ChatGPT, OpenAI's flagship, are not just products but battlegrounds. Whichever side wins the narrative of originality, security and trust may triumph not only in court but in the public eye.