xAI

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Musk fails to block California data disclosure law he fears will ruin xAI

AI, AI training data, California, chatbots, elon musk, First Amendment, grok, Policy, xAI / /

Musk can’t convince judge public doesn’t care about where AI training data comes from.

Elon Musk’s xAI has lost its bid for a preliminary injunction that would have temporarily blocked California from enforcing a law that requires AI firms to publicly share information about their training data.

xAI had tried to argue that California’s Assembly Bill 2013 (AB 2013) forced AI firms to disclose carefully guarded trade secrets.

The law requires AI developers whose models are accessible in the state to clearly explain which dataset sources were used to train models, when the data was collected, if the collection is ongoing, and whether the datasets include any data protected by copyrights, trademarks, or patents. Disclosures would also clarify whether companies licensed or purchased training data and whether the training data included any personal information. It would also help consumers assess how much synthetic data was used to train the model, which could serve as a measure of quality.

However, this information is precisely what makes xAI valuable, with its intensive data sourcing supposedly setting it apart from its biggest rivals, xAI argued. Allowing enforcement could be “economically devastating” to xAI, Musk’s company argued, effectively reducing “the value of xAI’s trade secrets to zero,” xAI’s complaint said. Further, xAI insisted, these disclosures “cannot possibly be helpful to consumers” while supposedly posing a real risk of gutting the entire AI industry.

Specifically, xAI argued that its dataset sources, dataset sizes, and cleaning methods were all trade secrets.

“If competitors could see the sources of all of xAI’s datasets or even the size of its datasets, competitors could evaluate both what data xAI has and how much they lack,” xAI argued. In one hypothetical, xAI speculated that “if OpenAI (another leading AI company) were to discover that xAI was using an important dataset to train its models that OpenAI was not, OpenAI would almost certainly acquire that dataset to train its own model, and vice versa.”

However, in an order issued on Wednesday, US District Judge Jesus Bernal said that xAI failed to show that California’s law, which took effect in January, required the company to reveal any trade secrets.

xAI’s biggest problem was being too vague about the harms it faced if the law was not halted, the judge said. Instead of explaining why the disclosures could directly harm xAI, the company offered only “a variety of general allegations about the importance of datasets in developing AI models and why they are kept secret,” Bernal wrote, describing X as trading in “frequent abstractions and hypotheticals.”

He denied xAI’s motion for a preliminary injunction while supporting the government’s interest in helping the public assess how the latest AI models were trained.

The lawsuit will continue, but xAI will have to comply with California’s law in the meantime. That could see Musk sharing information he’d rather OpenAI had no knowledge of at a time when he’s embroiled in several lawsuits against the leading AI firm he now regrets helping to found.

While not ending the fight to keep OpenAI away from xAI’s training data, this week’s ruling is another defeat for Musk after a judge last month tossed one of his OpenAI lawsuits, ruling that Musk had no proof that OpenAI had stolen trade secrets.

xAI argued California wants to silence Grok

xAI’s complaint argued that California’s law was unconstitutional since data can be considered a trade secret under the Fifth Amendment. The company also argued that the state was trying to regulate the outputs of xAI’s controversial chatbot, Grok, and was unfairly compelling speech from xAI while exempting other firms for security purposes.

At this stage of the litigation, Bernal disagreed that xAI might be irreparably harmed if the law was not halted.

On the Fifth Amendment claim, the judge said it’s not that training data could never be considered a trade secret. It’s just that xAI “has not identified any dataset or approach to cleaning and using datasets that is distinct from its competitors in a manner warranting trade secret protection.”

“It is not lost on the Court the important role of datasets in AI training and development, and that, hypothetically, datasets and details about them could be trade secrets,” Bernal wrote. But xAI “has not alleged that it actually uses datasets that are unique, that it has meaningfully larger or smaller datasets than competitors, or that it cleans its datasets in unique ways.”

Therefore, xAI is not likely to succeed on the merits of its Fifth Amendment claim.

The same goes for First Amendment arguments. xAI failed to show that the law improperly “forces developers to publicly disclose their data sources in an attempt to identify what California deems to be ‘data riddled with implicit and explicit biases,’” Bernal wrote.

To xAI, it seemed like the state was trying to use the law to influence the outputs of its chatbot Grok, the company argued, which should be protected commercial speech.

Over the past year, Grok has increasingly drawn global public scrutiny for its antisemitic rants and for generating nonconsensual intimate imagery (NCII) and child sexual abuse materials (CSAM). But despite these scandals, which prompted a California probe, Bernal contradicted xAI, saying California did not appear to be trying to regulate controversial or biased outputs, as xAI feared.

“Nothing in the language of the statute suggests that California is attempting to influence Plaintiff’s models’ outputs by requiring dataset disclosure,” Bernal wrote.

Addressing xAI’s other speech concerns, he noted that “the statute does not functionally ask Plaintiff to share its opinions on the role of certain datasets in AI model development or make ideological statements about the utility of various datasets or cleaning methods.”

“No part of the statute indicates any plan to regulate or censor models based on the datasets with which they are developed and trained,” Bernal wrote.

Public “cannot possibly” care about AI training data

Perhaps most frustrating for xAI as it continues to fight to block the law, Bernal also disputed that the public had no interest in the training data disclosures.

“It strains credulity to essentially suggest that no consumer is capable of making a useful evaluation of Plaintiff’s AI models by reviewing information about the datasets used to train them and that therefore there is no substantial government interest advanced by this disclosure statute,” Bernal wrote.

He noted that the law simply requires companies to alert the public about information that can feasibly be used to weigh whether they want to use one model over another.

Nothing about the required disclosures is inherently political, the judge suggested, although some consumers might select or avoid certain models with perceived political biases. As an example, Bernal opined that consumers may want to know “if certain medical data or scientific information was used to train a model” to decide if they can trust the model “to be sufficiently comprehensively trained and reliable for the consumer’s purposes.”

“In the marketplace of AI models, AB 2013 requires AI model developers to provide information about training datasets, thereby giving the public information necessary to determine whether they will use—or rely on information produced by—Plaintiff’s model relative to the other options on the market,” Bernal wrote.

Moving forward, xAI seems to face an uphill battle to win this fight. It will need to gather more evidence to demonstrate that its datasets or cleaning methods are sufficiently unique to be considered trade secrets that give the company a competitive edge.

It will also likely have to deepen its arguments that consumers don’t care about disclosures and that the government has not explored less burdensome alternatives that could “achieve the goal of transparency for consumers,” Bernal suggested.

One possible path to a win could be proving that California’s law is so vague that it potentially puts xAI on the hook for disclosing its customers’ training data for individual Grok licenses. But Bernal emphasized that xAI “must actually face such a conundrum—rather than raising an abstract possible issue among AI systems developers—for the Court to make a determination on this issue.”

xAI did not respond to Ars’ request to comment.

A spokesperson for the California Department of Justice told Reuters that the department “celebrates this key win and remains committed to continuing our defense” of the law.

Photo of Ashley Belanger

Ashley is a senior policy reporter for Ars Technica, dedicated to tracking social impacts of emerging policies and new technologies. She is a Chicago-based journalist with 20 years of experience.

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xAI spent $7M building wall that barely muffles annoying power plant noise

AI, ai data center, air pollution, Environmental Protection Agency, Policy, power plant, xAI / /

“Temu sound wall” not enough to quell fury over xAI’s power plant.

For miles around xAI’s makeshift power plant in Southaven, Mississippi, neighbors have endured months of constant roaring, erupting pops, and bursts of high-pitched whining from 27 temporary gas turbines installed without consulting the community.

In a report on Thursday, NBC News interviewed residents fighting to shut down xAI’s turbines. They confirmed that xAI operates the turbines day and night, allegedly tormenting residents in order to power xAI founder Elon Musk’s unbridled AI ambitions.

Eventually, 41 permanent gas turbines—that supposedly won’t be as noisy—will be installed, if xAI can secure the permitting. In the meantime, xAI has erected a $7 million “sound barrier” that’s supposed to mitigate some of the noise.

However, residents told NBC News that the wall that xAI built does little to quiet the din.

Taylor Logsdon, who lives near the power plant, said that neighbors nearby jokingly call it the “Temu sound wall,” referencing the Chinese e-commerce site known for peddling cheap, rather than high-quality goods. For Logsdon, the wall has not helped to calm her dogs, which have been unsettled by sudden booms and squeals that videos show can frequently be heard amid the turbines’ continual jet engine-like hum. Some residents are just as unsettled as the dogs, describing the noises from the plant as “scary.”

A nonprofit environmental advocacy group, the Safe and Sound Coalition, has been collecting evidence, hoping to raise awareness in the community to block xAI from obtaining permits for its permanent turbines. The group’s website links to videos documenting the noise, noise analysis reports, and public records showing how challenging it’s been to track xAI’s communications with public officials.

Safe and Sound Coalition video documents constant roars after a “loud bang” signaled “something popped off.”

For example, public records requests to the city of Southaven seeking information on xAI exemptions to noise ordinances or communications about the sound wall turned up nothing. A director overseeing the city’s planning and development claimed that the office was not “involved with the noise barrier wall” and could provide no details. Similarly, a permit clerk for the city’s building department confirmed there were no documents to share.

Asked for comment, a spokesperson for the coalition told Ars that the “absence of documentation raises transparency concerns.”

“When decisions with community impact are made without accessible records, it creates an accountability gap and limits the public’s ability to understand how those decisions were evaluated or authorized,” the spokesperson said.

An IT worker who co-founded the coalition, Jason Haley, told NBC News that xAI’s wall showed that the city could have required the company to do more to prevent noise pollution before upsetting community members.

“If you knew the noise was going to be an issue, put in a sound wall first,” Haley said. “Do some other stuff first before you torture us. That’s not that hard of an ask.”

xAI did not immediately respond to Ars’ request to comment. According to NBC News, the company has yet to make public a noise analysis that it conducted.

xAI’s turbines spark other concerns

xAI has maintained that it follows the law when rushing at breakneck speeds to build infrastructure to support its AI innovations. In Southaven, xAI was approved to operate the temporary gas turbines at the power plant for 12 months, without any additional permitting required.

Now it’s seeking permits for the permanent turbines, which residents worry could be nearly as loud, while possibly introducing more smog into an area that’s mostly homes, churches, parks, and schools, the Safe and Sound Coalition’s website said.

Pollutants could increase risks of asthma, heart attacks, stroke, and cancer, a community flyer the coalition distributed warned, urging attendance at a public meeting where residents could finally air their complaints (a meeting which NBC News’ report thoroughly documented). The flyer also suggested that the city’s main drinking water supply could be affected and perhaps tainted if the power plant’s wastewater contains toxic chemicals, since there isn’t a graywater recycling plant nearby. For residents, it’s hard to tell if things will ever get better. One noise analysis the coalition shared found that the daily sound of the turbines was higher on an “annoyance scale” than when entire neighborhoods set off New Year’s Eve fireworks.

“Our water, air, power grid, utility bills, property values, and health are all at risk,” the Safe and Sound Coalition’s website said. “We’re already facing toxic pollution and relentless industrial noise. There is no clear oversight, no transparency, and no plan to protect the people living nearby.”

The coalition expects that if enough community members protest the plant, the permitting agency will deny xAI’s permits and order any potentially dangerous turbines to be shut down. But other groups are taking a different approach, considering suing xAI if it continues operating the unpermitted gas turbines in Southaven.

Earlier this month, the Southern Environmental Law Center (SELC) joined the NAACP in sending xAI a notice of intent to sue. In that letter, groups warned that the Environmental Protection Agency (EPA) recently changed a rule that they argued now requires permits for the temporary turbines. They gave xAI 60 days to respond.

The same groups previously sent a legal threat to xAI, opposing alleged data center pollution in Memphis, Tenn. xAI eventually secured permits for some of the gas turbines sparking scrutiny there, which many locals found “devastating.” Further concerning, residents relying on drone imagery—with no other way to keep track of how many turbines xAI was running—warned that the permits only covered 15 of 24 turbines on site.

EPA shrugs off xAI permitting concerns

It’s unclear whether the SELC can win if it takes xAI to court, or whether the EPA would ever intervene if that action could be construed as delaying Trump’s order to rush permitting and build as many data centers as fast as possible to power AI.

The SELC declined Ars’ request to comment, but the EPA’s administrator, Lee Zeldin, seemed to negate that argument in an interview with Fox Business in January. Asked directly about xAI’s gas turbines, Zeldin confirmed that the EPA was working closely on permitting with local officials in Southaven and Shelby County—where xAI built a massive data center sparking protests.

Rather than suggesting that the EPA might be preparing to review xAI’s unpermitted gas turbines, Zeldin emphasized that for Donald Trump, it “is about getting permits done faster.”

“EPA has the power to slow things down; EPA also has the power to speed things up, and that’s where the Trump EPA is,” Zeldin said.

Permitting for the Southaven project’s permanent gas turbines may be approved as soon as next month, NBC News reported.

Residents skeptical second sound barrier will be better

For Southaven, xAI’s power plant—along with a planned data center, which Musk has dubbed “MACROHARDRR” to mock Microsoft—represents a chance to surge the local economy. That prospect seemingly swayed government support for the projects, which has apparently not waned in the face of mounting protests.

When Musk bought the dormant power plant, “it was the largest private investment in state history,” Tate Reeves, Mississippi’s Republican governor, claimed. Additionally, xAI’s affiliated company that’s behind the projects, MZX Tech, donated $1.38 million to the city’s police department, NBC News reported. Both the plant and the data center “are expected to bring in millions of dollars and new jobs,” Reeves said.

For Southaven residents, the only hope they have that the noise may die down any time soon is that construction on another sound barrier will be finished in the next two months, NBC News reported. Supposedly, engineers were taking time to study “what type of sound barrier would be most effective” amid complaints about the current sound barrier.

A spokesperson for the Safe and Sound Coalition told Ars that the group remains “skeptical” that the new wall will be any better than the first sound barrier.

“To our understanding, sound barriers can reduce certain frequencies under controlled conditions, but turbine noise involves low-frequency sounds and tonal components that often reach beyond barriers,” the coalition’s spokesperson said. “The most effective method for reducing industrial noise exposure is typically distance from residential areas, which is not a mitigation option in this scenario given the facility’s proximity to homes.”

The coalition urged xAI to be transparent and to share data backing mitigation claims if it wants the community to believe that the second sound barrier will make any difference.

“Without transparent modeling, validated field measurements, and independent verification, it is difficult to assess whether the barrier will meaningfully address the ongoing nuisance experienced by nearby residents,” the coalition’s spokesperson said. “Mitigation claims are only meaningful if they are supported by transparent data.”

Mayor labels protestors Musk haters

At least one city official, Mayor Darren Musselwhite, has suggested that community backlash is “political.” Although he acknowledged that the noise was a “legitimate concern,” he also claimed on Facebook that some people protesting xAI’s facility were simply Elon Musk haters, NBC News reported.

“Southaven is now under attack by all who choose to oppose Elon Musk because of his high-profile political stances,” Musselwhite wrote.

However, residents told NBC News that “their concerns have nothing to do with politics.” One person interviewed even praised Musk’s work with the Department of Government Efficiency.

Instead, they’re worried that local officials seeing dollar signs have potentially let xAI exploit loopholes to pollute communities without any warning. The community flyer from the Safe and Sound Coalition criticized what they viewed as shady behavior from local officials:

“This project was started behind our backs, with zero community input. Local officials have repeatedly downplayed concerns, spun the facts, and misled residents about the true impacts and the deals made with xAI. Many people only found out after the turbines were up and running.”

The coalition’s spokesperson told Ars that a health impact analysis published on behalf of the SELC provides “meaningful insight” into the biggest health risks. That concluded that using the EPA’s COBRA health impact model, emissions from running 41 permanent turbines at the Southaven plant “are estimated to result in $30–$44 million per year in health-related damages, including costs from premature deaths, hospital visits, and lost productivity. Over a typical 30-year operating life, these impacts would amount to approximately $588–$862 million in cumulative discounted public-health costs, borne largely by residents of Tennessee and Mississippi.”

Additionally, the largest amount of harmful pollutants increases are expected to be “concentrated in communities that are disproportionately Black, highly socially vulnerable, and have elevated baseline asthma prevalence,” the report said.

If the permits are issued, the Coalition’s spokesperson told Ars that the group expects to continue gathering reports of “firsthand experiences” from nearby residents, which will “continue to provide valuable information regarding ongoing impacts.” The group plans to continue engaging with officials and pushing for greater accountability and transparent monitoring, as well as documenting noise conditions, reviewing emissions reports, and collecting independent data where feasible.

“The Coalition’s focus is long-term community protection, which means tracking compliance, advocating for corrective action if standards are not met, and ensuring residents have access to accurate information about environmental and health impacts,” the spokesperson said. “Permit approval would not resolve community concerns; it would shift our focus toward ongoing oversight and enforcement.”

Photo of Ashley Belanger

Ashley is a senior policy reporter for Ars Technica, dedicated to tracking social impacts of emerging policies and new technologies. She is a Chicago-based journalist with 20 years of experience.

xAI spent $7M building wall that barely muffles annoying power plant noise Read More »

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Musk has no proof OpenAI stole xAI trade secrets, judge rules, tossing lawsuit

AI, Antitrust law, Artificial Intelligence, data centers, elon musk, openai, Policy, trade secrets, unfair competition law, xAI / /

Hostility is not proof of theft

Even twisting an ex-employee’s text to favor xAI’s reading fails to sway judge.

Elon Musk appears to be grasping at straws in a lawsuit accusing OpenAI of poaching eight xAI employees in an allegedly unlawful bid to access xAI trade secrets connected to its data centers and chatbot, Grok.

In a Tuesday order granting OpenAI’s motion to dismiss, US District Judge Rita F. Lin said that xAI failed to provide evidence of any misconduct from OpenAI.

Instead, xAI seemed fixated on a range of alleged conduct of former employees. But in assessing xAI’s claims, Lin said that xAI failed to show proof that OpenAI induced any of these employees to steal trade secrets “or that these former xAI employees used any stolen trade secrets once employed by OpenAI.”

Two employees admitted to stealing confidential information, with both downloading xAI’s source code and one improperly grabbing a supposedly sensitive recording from a Musk “All Hands” meeting. But the rest were either accused of retaining seemingly less consequential data, like retaining work chats on their devices, or didn’t seem to hold any confidential information at all. Lin called out particularly weak arguments that xAI’s complaint acknowledged that one employee who OpenAI poached never received access to confidential information allegedly sought after exiting xAI, and two employees were lumped into the complaint who “simply left xAI for OpenAI,” Lin noted.

From the limited evidence, Lin concluded that “while xAI may state misappropriation claims against a couple of its former employees, it does not state a plausible misappropriation claim against OpenAI.”

Lin’s order will likely not be the end of the litigation, as she is allowing xAI to amend its complaint to address the current deficiencies.

Ars could not immediately reach xAI for comment, so it’s unclear what steps xAI may take next.

However, xAI seems unlikely to give up the fight, which OpenAI has alleged is part of a “harassment campaign” that Musk is waging through multiple lawsuits attacking his biggest competitor’s business practices.

Unsurprisingly, OpenAI celebrated the order on X, alleging that “this baseless lawsuit was never anything more than yet another front in Mr. Musk’s ongoing campaign of harassment.”

Other tech companies poaching talent for AI projects will likely be relieved while reading Lin’s order. Commercial litigator Sarah Tishler told Ars that the order “boils down to a fundamental concept in trade secret law: hiring from a competitor is not the same as stealing trade secrets from one.”

“Under the Defend Trade Secrets Act, xAI has to show that OpenAI actually received and used the alleged trade secrets, not just that it hired employees who may have taken them,” Tishler said. “Suspicious timing, aggressive recruiting, and even downloaded files are not enough on their own.”

Tishler suggested that the ruling will likely be welcomed by AI firms eager to secure the best talent without incurring legal risks from their hiring practices.

“In the AI industry, where talent moves fast and the competitive stakes are enormous, this ruling reaffirms that suspicion is not enough,” Tishler said. “You have to show the stolen information actually made it into the competitor’s hands and was put to use.”

OpenAI not liable for engineers swiping source code

Through the lawsuit, Musk has alleged that OpenAI is violating California’s unfair competition law. He claims that OpenAI is attempting “to destroy legitimate competition in the AI industry by neutralizing xAI’s innovations” and forcing xAI “to unfairly compete against its own trade secrets.”

But this claim hinges entirely upon xAI proving that OpenAI poached its employees to steal its trade secrets. So, for xAI’s lawsuit to proceed, xAI will need to beef up the evidence base for its other claim, that OpenAI has violated the federal Defend Trade Secrets Act, Lin said. To succeed on that, xAI must prove that OpenAI unlawfully acquired, disclosed, or used a trade secret with xAI’s consent.

That will likely be challenging because xAI, at this point, has not offered “any nonconclusory allegations that OpenAI itself acquired, disclosed, or used xAI’s trade secrets,” Lin wrote.

All xAI has claimed is that OpenAI induced former employees to share secrets, and so far, nothing backs that claim, Lin said. Tishler noted that the court also rejected an xAI theory that “OpenAI should be responsible for what its new hires did before they arrived” for “the same reason: without evidence that OpenAI directed the theft or actually put the stolen information to use, you cannot hold the company liable.”

The strongest evidence that xAI had of employee misconduct, allegedly allowing OpenAI to misappropriate xAI trade secrets, revolves around the departure of one of xAI’s earliest engineers, Xuechen Li.

That evidence wasn’t enough, Lin said. xAI alleged that Li gave a presentation to OpenAI that supposedly included confidential information. Li also uploaded “the entire xAI source code base to a personal cloud account,” which he had connected to ChatGPT, Lin noted, after a recruiter sent a message on Signal sharing a link with Li to another unrelated cloud storage location.

xAI hoped the Signal messages would shock the court, expecting it to read through the lines the way xAI did. As proof that OpenAI allegedly got access to xAI’s source code, xAI pointed to a Signal message that an OpenAI recruiter sent to Li “four hours after” Li downloaded the source code, saying “nw!” xAI has alleged this message is short-hand for “no way!”—suggesting the OpenAI recruiter was geeked to get access to xAI’s source code. But in a footnote, Lin said that “OpenAI insists that ‘nw’ means ‘no worries,’” and thus is unconnected to Li’s decision to upload the source code to a ChatGPT-linked cloud account.

Even interpreting the text using xAI’s reading, however, xAI did not show enough to prove the recruiter or OpenAI accessed or requested the files, Lin said.

It also didn’t help xAI’s case that a temporary injunction that xAI secured in a separate lawsuit targeting the engineer blocked Li from accepting a job at OpenAI.

That injunction led OpenAI to withdraw its job offer to Li. And that’s a problem for xAI, because since Li never worked at OpenAI, it’s clear that he never used xAI’s trade secrets while working for OpenAI.

Further weakening xAI’s arguments, if Li indeed shared confidential information during his presentation while interviewing for OpenAI, xAI has alleged no facts suggesting that OpenAI was aware Li was sharing xAI trade secrets, Lin wrote.

This “makes it very hard to argue OpenAI ever used anything he allegedly took,” Tishler told Ars.

Another former xAI engineer, Jimmy Fraiture, was accused of copying xAI trade secrets, but Fraiture has said he deleted the information he improperly downloaded before starting his job at OpenAI. Importantly, Lin said, since he joined OpenAI, there’s no evidence that he used xAI trade secrets to benefit xAI’s rival.

“Other than the bare fact that Fraiture had been recruited” by the same OpenAI employee “who had also recruited Li, xAI does not allege any facts indicating that OpenAI had encouraged Fraiture to take xAI’s confidential information in the first place,” Lin wrote.

Since “none of the other former employees allegedly shared with or disclosed to OpenAI any xAI trade secrets,” xAI could not advance its claim that OpenAI misappropriated trade secrets based only on allegations tied to Li and Fraiture’s supposed misconduct, Lin said.

xAI may be able to amend its complaint to maintain these arguments, but the company has thus far presented scant, purely circumstantial evidence.

It’s possible that xAI will secure more evidence to support its misappropriation claims against OpenAI in its ongoing lawsuit against Li. Ars could not immediately reach Li’s lawyer to find out if today’s ruling may impact that case.

Ex-executive’s “hostility” is not proof of theft

Among the least convincing arguments that xAI raised was a claim that an unnamed finance executive left xAI to take a “lesser role” at OpenAI after learning everything he knew about data centers from xAI.

That executive slighted xAI when Musk’s company later attempted to inquire about “confidentiality concerns.”

“Suck my dick,” the former xAI executive allegedly said, refusing to explain how his OpenAI work might overlap with his xAI position. “Leave me the fuck alone.”

xAI tried to argue that the executive’s hostility was proof of misconduct. But Lin wrote that xAI only alleged that the executive “merely possessed xAI trade secrets about data centers” and did not allege that he ever used trade secrets to benefit OpenAI.

Had xAI found evidence that OpenAI’s data center strategy suddenly mirrored xAI’s after the executive joined xAI’s rival, that may have helped xAI’s case. But there are plenty of reasons a former employee might reject an ex-employer’s outreach following an exit, Lin suggested.

“His hostility when xAI reached out about its confidentiality concerns also does not support a plausible inference of use,” Lin wrote. “Hostility toward one’s former employer during departure does not, without more, indicate use of trade secrets in a subsequent job. Nor does the executive’s lack of experience with AI data centers before his time at xAI, without more, support a plausible inference that he used xAI’s trade secrets at OpenAI.”

xAI has until March 17 to amend its complaint to keep up this particular fight against OpenAI. But the company won’t be able to add any new claims or parties, Lin noted, “or otherwise change the allegations except to correct the identified deficiencies.”

Criminal probe likely leaves OpenAI on pins

For Li, the engineer accused of disclosing xAI trade secrets with OpenAI, the litigation could eliminate one front of discovery as he navigates two other legal fights over xAI’s trade secrets claims.

Tishler has been closely monitoring xAI’s trade secret legal battles. In October, she noted that Li is in a particularly prickly position, facing pressure in civil litigation from Musk to turn over data that could be used against him in the Federal Bureau of Investigation’s criminal investigation into Musk’s allegations. As Tishler explained:

“The practical reality is stark: Li faces a choice between protecting himself in the criminal action with his silence, and the civil consequences of doing so. Refuse to answer, and xAI could argue adverse inferences; answer, and the responses could feed the criminal case.”

Ultimately, the FBI is trying to prove that Li stole information that qualified as a trade secret and intended to use it for OpenAI’s benefit, while knowing that it would harm xAI. If they succeed, “xAI would suddenly have a government-backed record that its trade secrets were stolen,” Tishler wrote.

If xAI were so armed and able to keep the OpenAI lawsuit alive, the central question in the lawsuit that Lin dismissed today would shift, Tishler suggested, from “was there a theft?” to “what did OpenAI know, and when did it know it?”

Photo of Ashley Belanger

Ashley is a senior policy reporter for Ars Technica, dedicated to tracking social impacts of emerging policies and new technologies. She is a Chicago-based journalist with 20 years of experience.

Musk has no proof OpenAI stole xAI trade secrets, judge rules, tossing lawsuit Read More »

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Yet another co-founder departs Elon Musk’s xAI

AI, elon musk, elon musk xai, xAI, xAI Grok / /

Other recent high-profile xAI departures include general counsel Robert Keele, communications executives Dave Heinzinger and John Stoll, head of product engineering Haofei Wang, and CFO Mike Liberatore, who left for a role at OpenAI after just 102 days of what he called “120+ hour weeks.”

A different company

Wu leaves a company that is in a very different place than it was when he helped create it in 2023. His departure comes just days after CEO Elon Musk merged xAI with SpaceX, a move Musk says will allow for orbiting data centers and, eventually, “scaling to make a sentient sun to understand the Universe and extend the light of consciousness to the stars!” But some see the move as more of a financial engineering play, combining xAI’s nearly $1 billion a year in losses and SpaceX’s roughly $8 billion in annual profits into a single, more IPO-ready entity.

Musk previously rolled social media network X (formerly Twitter) into a unified entity with xAI back in March. At the time of the deal, X was valued at $33 billion, 25 percent less than Musk paid for the social network in 2022.

xAI has faced a fresh wave of criticism in recent months over Grok’s willingness to generate sexualized images of minors. That has led to an investigation by California’s attorney general and a police raid of the company’s Paris offices.

Yet another co-founder departs Elon Musk’s xAI Read More »

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SpaceX acquires xAI, plans to launch a massive satellite constellation to power it

AI, orbital data centers, Space, spacex, xAI / /

We’re going to need more X’s

“This marks not just the next chapter, but the next book in SpaceX and xAI’s mission.”

SpaceX’s Starship and Super Heavy booster lift off from Starbase, Texas, in March 2025. Credit: SpaceX

SpaceX has formally acquired another one of Elon Musk’s companies, xAi, the space company announced on Monday afternoon.

“SpaceX has acquired xAI to form the most ambitious, vertically-integrated innovation engine on (and off) Earth, with AI, rockets, space-based internet, direct-to-mobile device communications and the world’s foremost real-time information and free speech platform,” the company said. “This marks not just the next chapter, but the next book in SpaceX and xAI’s mission: scaling to make a sentient sun to understand the Universe and extend the light of consciousness to the stars!”

The merging of what is arguably Musk’s most successful company, SpaceX, with the more speculative xAI venture is a risk. Founded in 2023, xAI’s main products are the generative AI chatbot, Grok, and the social media site X, formerly known as Twitter. The company aims to compete with OpenAI and other artificial intelligence firms. However, Grok has been controversial, including the sexualization of women and children through AI-generated images, as has Musk’s management of Twitter.

Vertically integrating AI and space

There can be no question that the merger of SpaceX—the world’s premiere spaceflight company—and the artificial intelligence firm offer potential strategic advances. Musk strongly believes that artificial intelligence is central to humanity’s future and wants to be among those leading in its development. With this merger, he plans to use SpaceX’s deep expertise in rapid launch and satellite manufacturing and management to deploy a constellation of up to 1 million orbital data centers. This will provide the backbone of computing power needed to support xAI’s operations.

Musk’s plan for the merged companies is predicated on several assumptions, including that AI is not a bubble, but rather a technology that will be fully embraced in the future; that orbital data centers are cost-competitive compared to ground-based data centers; and that compute is the essential roadblock that must be solved for widespread adoption of AI by society.

If these assumptions are true, the merged SpaceX-xAI company holds a powerful position. It could potentially own a full stack of capabilities, from launch to orbital bandwidth to frontier AI models, and with Starlink Internet, it could provide AI on demand, anywhere in the world, to any mobile device.

SpaceX already has the world’s workhorse reusable rocket with the Falcon 9. It can presently deliver about 20 tons to low-Earth orbit for an internal cost of $15 million, compared to more than four or five times that on the open market. Moreover, SpaceX is working toward fully reusable super heavy lift rocket with its Starship vehicle.

The privately held company also operates more satellites, about 9,600, than any other country or company in the world by a factor of 10. It has extensive operations not just in deploying but also in operating this constellation over the last decade. This is not a simple capability.

“I would say there have been as many engineering advancements in orbital safety and collision prevention in the last 10 years as there have been advances in rocketry, and that may have gone unnoticed,” said Brian Weeden, director of civil and commercial policy at The Aerospace Corporation, in an interview.

“Happening really fast”

In an email to SpaceX employees on Monday, Musk said Starship will begin launching V3 Starlink satellites into orbit this year, as well as the next generation of direct-to-mobile satellites. The launches, he said, will be a “forcing function” to improve the performance of Starship, making it more rapidly reusable for data center deployment.

“The sheer number of satellites that will be needed for space-based data centers will push Starship to even greater heights,” Musk wrote. “With launches every hour carrying 200 tons per flight, Starship will deliver millions of tons to orbit and beyond per year, enabling an exciting future where humanity is out exploring amongst the stars.”

Musk told employees that launching 1 million tons per year of satellites, generating 100 kW of compute power per ton, would add 100 gigawatts of AI compute capacity annually, “with no ongoing operational or maintenance needs.” Ultimately, Musk believes there is a path to launching 1 TW/year from Earth.

“My estimate is that within 2 to 3 years, the lowest cost way to generate AI compute will be in space,” Musk wrote. “This cost-efficiency alone will enable innovative companies to forge ahead in training their AI models and processing data at unprecedented speeds and scales, accelerating breakthroughs in our understanding of physics and invention of technologies to benefit humanity.”

Musk is clearly bullish on the future of AI and on space’s potential to address the voracious power needs of AI data centers. Many people in the AI industry speculate that artificial intelligence is likely to go through serious and sustained growing pains, or doubt that space-based data centers can compete with operations built on the ground. But Musk, more than anyone, has the means to press forward the bull case for space-based AI, and he is going for it.

Monday’s merger follows an ultra-ambitious filing on Friday with the Federal Communications Commission in which SpaceX sought permission to launch 1 million satellites that will operate as “orbital data centers.” The company said it would deploy the satellites to orbits with an altitude between 500 and 2,000km, and 30-degree and Sun-synchronous inclinations.

SpaceX also recently announced its plans to deploy a space situational awareness system, called Stargaze, that will use star trackers to provide data on potential conjunctions between satellites in orbit. The goal is to help de-conflict satellite trajectories and avoid collisions in low-Earth orbit.

“This is all happening really fast,” said Victoria Samson, chief director of space security and stability for Secure World Foundation, in an interview.

Crowded orbits

Samson said that, at present, satellites have a fairly large “bubble” of space around them when it comes to collision detection. This is because of uncertainties in the precise location and movement of vehicles. If you improve space situational awareness, such as what SpaceX seeks to do with Stargaze, those bubbles could be shrunk to reduce the number of potential collision warnings. But that will come with risks.

“There’s a lot of room in space, of course,” Samson said. “But the question is, how much risk do you want to take?”

A technical expert at The Aerospace Corporation, Marlon Sorge, told Ars that many unanswered questions about SpaceX’s proposed megaconstellation for orbital data centers make it difficult to assess the risks of collision. This includes their size (they will require very large solar arrays to collect sunlight) and precisely where the satellites will be deployed. There is already a lot of debris at around 800 to 1,000 km above Earth from previous collisions, including from an infamous Chinese anti-satellite missile test in 2007, which created more than 3,000 pieces of golf-ball-sized or larger debris.

Above that altitude, there is less debris, Sorge said. But objects at that altitude take centuries to deorbit naturally, due to the very limited atmosphere.

“The big challenge at those altitudes is the stuff that’s up there stays up there,” Sorge said. “If you generate more debris, if you have problems, it won’t go away, so you’re stuck with it.”

SpaceX sought to address these concerns in its regulatory filing, noting that each satellite would have “redundant maneuverability capabilities” in order to deorbit into Earth’s atmosphere. The filing also appears to recognize emerging science that indicates that aluminum burning up from reentering satellites is harmful to ozone levels. To address this, SpaceX is considering moving aging satellites into “high altitude Earth orbits or heliocentric orbits.”

However, Sorge noted that the amount of energy, or delta-V, needed to move a satellite from low-Earth orbit into a heliocentric orbit is “non-trivial.”

Has SpaceX lost its way?

One of the many questions raised by the new merger is whether SpaceX has lost its way. Musk founded the company in 2002 with the singular purpose of settling Mars, an audacious if not impossible goal at the time. In the decades since, SpaceX has made credible progress toward Mars, and with Starship, humanity has for the first time a transportation system potentially capable of landing humans on the red planet.

But acquiring an AI company and putting so much effort into orbital data centers? Is this consistent with the Mars mission? Musk clearly thinks it is.

“While launching AI satellites from Earth is the immediate focus, Starship’s capabilities will also enable operations on other worlds,” he wrote. “Thanks to advancements like in-space propellant transfer, Starship will be capable of landing massive amounts of cargo on the Moon. Once there, it will be possible to establish a permanent presence for scientific and manufacturing pursuits. Factories on the Moon can take advantage of lunar resources to manufacture satellites and deploy them further into space.”

And from there, he said, Mars will be firmly on the horizon.

“The capabilities we unlock by making space-based data centers a reality will fund and enable self-growing bases on the Moon, an entire civilization on Mars and ultimately expansion to the Universe,” he wrote.

That’s the vision, at least.

Photo of Eric Berger

Eric Berger is the senior space editor at Ars Technica, covering everything from astronomy to private space to NASA policy, and author of two books: Liftoff, about the rise of SpaceX; and Reentry, on the development of the Falcon 9 rocket and Dragon. A certified meteorologist, Eric lives in Houston.

SpaceX acquires xAI, plans to launch a massive satellite constellation to power it Read More »

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Asking Grok to delete fake nudes may force victims to sue in Musk’s chosen court

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Millions likely harmed by Grok-edited sex images as X advertisers shrugged.

Journalists and advocates have been trying to grasp how many victims in total were harmed by Grok’s nudifying scandal after xAI delayed restricting outputs and app stores refused to cut off access for days.

The latest estimates show that perhaps millions were harmed in the days immediately after Elon Musk promoted Grok’s undressing feature on his own X feed by posting a pic of himself in a bikini.

Over just 11 days after Musk’s post, Grok sexualized more than 3 million images, of which 23,000 were of children, the Center for Countering Digital Hate (CCDH) estimated in research published Thursday.

That figure may be inflated, since CCDH did not analyze prompts and could not determine if images were already sexual prior to Grok’s editing. However, The New York Times shared the CCDH report alongside its own analysis, conservatively estimating that about 41 percent (1.8 million) of 4.4 million images Grok generated between December 31 and January 8 sexualized men, women, and children.

For xAI and X, the scandal brought scrutiny, but it also helped spike X engagement at a time when Meta’s rival app, Threads, has begun inching ahead of X in daily usage by mobile device users, TechCrunch reported. Without mentioning Grok, X’s head of product, Nikita Bier, celebrated the “highest engagement days on X” in an X post on January 6, just days before X finally started restricting some of Grok’s outputs for free users.

Whether or not xAI intended the Grok scandal to surge X and Grok use, that appears to be the outcome. The Times charted Grok trends and found that in the nine days prior to Musk’s post, combined, Grok was only used about 300,000 times to generate images, but after Musk’s post, “the number of images created by Grok surged to nearly 600,000 per day” on X.

In an article declaring that “Elon Musk cannot get away with this,” writers for The Atlantic suggested that X users “appeared to be imitating and showing off to one another,” believing that using Grok to create revenge porn “can make you famous.”

X has previously warned that X users who generate illegal content risk permanent suspensions, but X has not confirmed if any users have been banned since public outcry over Grok’s outputs began. Ars asked and will update this post if X provides any response.

xAI fights victim who begged Grok to remove images

At first, X only limited Grok’s image editing for some free users, which The Atlantic noted made it seem like X was “essentially marketing nonconsensual sexual images as a paid feature of the platform.”

But then, on January 14, X took its strongest action to restrict Grok’s harmful outputs—blocking outputs prompted by both free and paid X users. That move came after several countries, perhaps most notably the United Kingdom, and at least one state, California, launched probes.

Crucially, X’s updates did not apply to the Grok app or website; however, it can reportedly still be used to generate nonconsensual images.

That’s a problem for victims targeted by X users, according to Carrie Goldberg, a lawyer representing Ashley St. Clair, one of the first Grok victims to sue xAI; St. Clair also happens to be the mother of one of Musk’s children.

Goldberg told Ars that victims like St. Clair want changes on all Grok platforms, not just X. But it’s not easy to “compel that kind of product change in a lawsuit,” Goldberg said. That’s why St. Clair is hoping the court will agree that Grok is a public nuisance, a claim that provides some injunctive relief to prevent broader social harms if she wins.

Currently, St. Clair is seeking a temporary injunction that would block Grok from generating harmful images of her. But before she can get that order, if she wants a fair shot at winning the case, St. Clair must fight an xAI push counter-suing her and trying to move her lawsuit into Musk’s preferred Texas court, a recent court filing suggests.

In that fight, xAI is arguing that St. Clair is bound by xAI’s terms of service, which were updated the day after she notified the company of her intent to sue.

Alarmingly, xAI argued that St. Clair effectively agreed to the TOS when she started prompting Grok to delete her nonconsensual images—which is the only way X users had to get images removed quickly, St. Clair alleged. It seems xAI is hoping to turn moments of desperation, where victims beg Grok to remove images, into a legal shield.

In the filing, Goldberg wrote that St. Clair’s lawsuit has nothing to do with her own use of Grok, noting that the harassing images could have been made even if she never used any of xAI’s products. For that reason alone, xAI should not be able to force a change in venue.

Further, St. Clair’s use of Grok was clearly under duress, Goldberg argued, noting that one of the photos that Grok edited showed St. Clair’s toddler’s backpack.

“REMOVE IT!!!” St. Clair asked Grok, allegedly feeling increasingly vulnerable every second the images remained online.

Goldberg wrote that Barry Murphy, an X Safety employee, provided an affidavit that claimed that this instance and others of St. Clair “begging @Grok to remove illegal content constitutes an assent to xAI’s TOS.”

But “such cannot be the case,” Goldberg argued.

Faced with “the implicit threat that Grok would keep the images of St. Clair online and, possibly, create more of them,” St. Clair had little choice but to interact with Grok, Goldberg argued. And that prompting should not gut protections under New York law that St. Clair seeks to claim in her lawsuit, Goldberg argued, asking the court to void St. Clair’s xAI contract and reject xAI’s motion to switch venues.

Should St. Clair win her fight to keep the lawsuit in New York, the case could help set precedent for perhaps millions of other victims who may be contemplating legal action but fear facing xAI in Musk’s chosen court.

“It would be unjust to expect St. Clair to litigate in a state so far from her residence, and it may be so that trial in Texas will be so difficult and inconvenient that St. Clair effectively will be deprived of her day in court,” Goldberg argued.

Grok may continue harming kids

The estimated volume of sexualized images reported this week is alarming because it suggests that Grok, at the peak of the scandal, may have been generating more child sexual abuse material (CSAM) than X finds on its platform each month.

In 2024, X Safety reported 686,176 instances of CSAM to the National Center for Missing and Exploited Children, which, on average, is about 57,000 CSAM reports each month. If the CCDH’s estimate of 23,000 Grok outputs that sexualize children over an 11-day span is accurate, then an average monthly total may have exceeded 62,000 if Grok was left unchecked.

NCMEC did not immediately respond to Ars’ request to comment on how the estimated volume of Grok’s CSAM compares to X’s average CSAM reporting. But NCMEC previously told Ars that “whether an image is real or computer-generated, the harm is real, and the material is illegal.” That suggests Grok could remain a thorn in NCMEC’s side, as the CCDH has warned that even when X removes harmful Grok posts, “images could still be accessed via separate URLs,” suggesting that Grok’s CSAM and other harmful outputs could continue spreading. The CCDH also found instances of alleged CSAM that X had not removed as of January 15.

This is why child safety experts have advocated for more testing to ensure that AI tools like Grok don’t roll out capabilities like the undressing feature. NCMEC previously told Ars that “technology companies have a responsibility to prevent their tools from being used to sexualize or exploit children.” Amid a rise in AI-generated CSAM, the UK’s Internet Watch Foundation similarly warned that “it is unacceptable that technology is released which allows criminals to create this content.”

xAI advertisers, investors, partners remain silent

Yet, for Musk and xAI, there have been no meaningful consequences for Grok’s controversial outputs.

It’s possible that recently launched probes will result in legal action in California or fines in the UK or elsewhere, but those investigations will likely take months to conclude.

While US lawmakers have done little to intervene, some Democratic senators have attempted to ask Google and Apple CEOs why X and the Grok app were never restricted in their app stores, demanding a response by January 23. One day ahead of that deadline, senators confirmed to Ars that they’ve received no responses.

Unsurprisingly, neither Google nor Apple responded to Ars’ request to confirm whether a response is forthcoming or provide any statements on their decisions to keep the apps accessible. Both companies have been silent for weeks, along with other Big Tech companies that appear to be afraid to speak out against Musk’s chatbot.

Microsoft and Oracle, which “run Grok on their cloud services,” as well as Nvidia and Advanced Micro Devices, “which sell xAI the computer chips needed to train and run Grok,” declined The Atlantic’s request to comment on how the scandal has impacted their decisions to partner with xAI. Additionally, a dozen of xAI’s key investors simply didn’t respond when The Atlantic asked if “they would continue partnering with xAI absent the company changing its products.”

Similarly, dozens of advertisers refused Popular Information’s request to explain why there was no ad boycott over the Grok CSAM reports. That includes companies that once boycotted X over an antisemitic post from Musk, like “Amazon, Microsoft, and Google, all of which have advertised on X in recent days,” Popular Information reported.

It’s possible that advertisers fear Musk’s legal wrath if they boycott his platforms. The CCDH overcame a lawsuit from Musk last year, but that’s pending an appeal. And Musk’s so-called “thermonuclear” lawsuit against advertisers remains ongoing, with a trial date set for this October.

The Atlantic suggested that xAI stakeholders are likely hoping the Grok scandal will blow over and they’ll escape unscathed by staying silent. But so far, backlash has seemed to remain strong, perhaps because, while “deepfakes are not new,” xAI “has made them a dramatically larger problem than ever before,” The Atlantic opined.

“One of the largest forums dedicated to making fake images of real people,” Mr. Deepfakes, shut down in 2024 after public backlash over 43,000 sexual deepfake videos depicting about 3,800 individuals, the NYT reported. If the most recent estimates of Grok’s deepfakes are accurate, xAI shows how much more damage can be done when nudifying becomes a feature of one of the world’s biggest social networks, and nobody who has the power to stop it moves to intervene.

“This is industrial-scale abuse of women and girls,” Imran Ahmed, the CCDH’s chief executive, told NYT. “There have been nudifying tools, but they have never had the distribution, ease of use or the integration into a large platform that Elon Musk did with Grok.”

Photo of Ashley Belanger

Ashley is a senior policy reporter for Ars Technica, dedicated to tracking social impacts of emerging policies and new technologies. She is a Chicago-based journalist with 20 years of experience.

Asking Grok to delete fake nudes may force victims to sue in Musk’s chosen court Read More »

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Elon Musk accused of making up math to squeeze $134B from OpenAI, Microsoft

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Musk’s math reduced ChatGPT inventors’ contributions to “zero,” OpenAI argued.

Elon Musk is going for some substantial damages in his lawsuit accusing OpenAI of abandoning its nonprofit mission and “making a fool out of him” as an early investor.

On Friday, Musk filed a notice on remedies sought in the lawsuit, confirming that he’s seeking damages between $79 billion and $134 billion from OpenAI and its largest backer, co-defendant Microsoft.

Musk hired an expert he has never used before, C. Paul Wazzan, who reached this estimate by concluding that Musk’s early contributions to OpenAI generated 50 to 75 percent of the nonprofit’s current value. He got there by analyzing four factors: Musk’s total financial contributions before he left OpenAI in 2018, Musk’s proposed equity stake in OpenAI in 2017, Musk’s current equity stake in xAI, and Musk’s nonmonetary contributions to OpenAI (like investing time or lending his reputation).

The eye-popping damage claim shocked OpenAI and Microsoft, which could also face punitive damages in a loss.

The tech giants immediately filed a motion to exclude Wazzan’s opinions, alleging that step was necessary to avoid prejudicing a jury. Their filing claimed that Wazzan’s math seemed “made up,” based on calculations the economics expert testified he’d never used before and allegedly “conjured” just to satisfy Musk.

For example, Wazzan allegedly ignored that Musk left OpenAI after leadership did not agree on how to value Musk’s contributions to the nonprofit. Problematically, Wazzan’s math depends on an imaginary timeline where OpenAI agreed to Musk’s 2017 bid to control 51.2 percent of a new for-profit entity that was then being considered. But that never happened, so it’s unclear why Musk would be owed damages based on a deal that was never struck, OpenAI argues.

It’s also unclear why Musk’s stake in xAI is relevant, since OpenAI is a completely different company not bound to match xAI’s offerings. Wazzan allegedly wasn’t even given access to xAI’s actual numbers to help him with his estimate, only referring to public reporting estimating that Musk owns 53 percent of xAI’s equity. OpenAI accused Wazzan of including the xAI numbers to inflate the total damages to please Musk.

“By all appearances, what Wazzan has done is cherry-pick convenient factors that correspond roughly to the size of the ‘economic interest’ Musk wants to claim, and declare that those factors support Musk’s claim,” OpenAI’s filing said.

Further frustrating OpenAI and Microsoft, Wazzan opined that Musk and xAI should receive the exact same total damages whether they succeed on just one or all of the four claims raised in the lawsuit.

OpenAI and Microsoft are hoping the court will agree that Wazzan’s math is an “unreliable… black box” and exclude his opinions as improperly reliant on calculations that cannot be independently tested.

Microsoft could not be reached for comment, but OpenAI has alleged that Musk’s suit is a harassment campaign aimed at stalling a competitor so that his rival AI firm, xAI, can catch up.

“Musk’s lawsuit continues to be baseless and a part of his ongoing pattern of harassment, and we look forward to demonstrating this at trial,” an OpenAI spokesperson said in a statement provided to Ars. “This latest unserious demand is aimed solely at furthering this harassment campaign. We remain focused on empowering the OpenAI Foundation, which is already one of the best resourced nonprofits ever.”

Only Musk’s contributions counted

Wazzan is “a financial economist with decades of professional and academic experience who has managed his own successful venture capital firm that provided seed-level funding to technology startups,” Musk’s filing said.

OpenAI explained how Musk got connected with Wazzan, who testified that he had never been hired by any of Musk’s companies before. Instead, three months before he submitted his opinions, Wazzan said that Musk’s legal team had reached out to his consulting firm, BRG, and the call was routed to him.

Wazzan’s task was to figure out how much Musk should be owed after investing $38 million in OpenAI—roughly 60 percent of its seed funding. Musk also made nonmonetary contributions Wazzan had to weigh, like “recruiting key employees, introducing business contacts, teaching his cofounders everything he knew about running a successful startup, and lending his prestige and reputation to the venture,” Musk’s filing said.

The “fact pattern” was “pretty unique,” Wazzan testified, while admitting that his calculations weren’t something you’d find “in a textbook.”

Additionally, Wazzan had to factor in Microsoft’s alleged wrongful gains, by deducing how much of Microsoft’s profits went back into funding the nonprofit. Microsoft alleged Wazzan got this estimate wrong after assuming that “some portion of Microsoft’s stake in the OpenAI for-profit entity should flow back to the OpenAI nonprofit” and arbitrarily decided that the portion must be “equal” to “the nonprofit’s stake in the for-profit entity.” With this odd math, Wazzan double-counted value of the nonprofit and inflated Musk’s damages estimate, Microsoft alleged.

“Wazzan offers no rationale—contractual, governance, economic, or otherwise—for reallocating any portion of Microsoft’s negotiated interest to the nonprofit,” OpenAI’s and Microsoft’s filing said.

Perhaps most glaringly, Wazzan reached his opinions without ever weighing the contributions of anyone but Musk, OpenAI alleged. That means that Wazzan’s analysis did not just discount efforts of co-founders and investors like Microsoft, which “invested billions of dollars into OpenAI’s for-profit affiliate in the years after Musk quit.” It also dismissed scientists and programmers who invented ChatGPT as having “contributed zero percent of the nonprofit’s current value,” OpenAI alleged.

“I don’t need to know all the other people,” Wazzan testified.

Musk’s legal team contradicted expert

Wazzan supposedly also did not bother to quantify Musk’s nonmonetary contributions, which could be in the thousands, millions, or billions based on his vague math, OpenAI argued.

Even Musk’s legal team seemed to contradict Wazzan, OpenAI’s filing noted. In Musk’s filing on remedies, it’s acknowledged that the jury may have to adjust the total damages. Because Wazzan does not break down damages by claims and merely assigns the same damages to each individual claim, OpenAI argued it will be impossible for a jury to adjust any of Wazzan’s black box calculations.

“Wazzan’s methodology is made up; his results unverifiable; his approach admittedly unprecedented; and his proposed outcome—the transfer of billions of dollars from a nonprofit corporation to a donor-turned competitor—implausible on its face,” OpenAI argued.

At a trial starting in April, Musk will strive to convince a court that such extraordinary damages are owed. OpenAI hopes he’ll fail, in part since “it is legally impossible for private individuals to hold economic interests in nonprofits” and “Wazzan conceded at deposition that he had no reason to believe Musk ‘expected a financial return when he donated… to OpenAI nonprofit.’”

“Allowing a jury to hear a disgorgement number—particularly one that is untethered to specific alleged wrongful conduct and results in Musk being paid amounts thousands of times greater than his actual donations—risks misleading the jury as to what relief is recoverable and renders the challenged opinions inadmissible,” OpenAI’s filing said.

Wazzan declined to comment. xAI did not immediately respond to Ars’ request to comment.

Photo of Ashley Belanger

Ashley is a senior policy reporter for Ars Technica, dedicated to tracking social impacts of emerging policies and new technologies. She is a Chicago-based journalist with 20 years of experience.

Elon Musk accused of making up math to squeeze $134B from OpenAI, Microsoft Read More »

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Mother of one of Elon Musk’s offspring sues xAI over sexualized deepfakes

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The news comes as xAI and Musk have come under fire over fake sexualized images of women and children, which proliferated on the platform this year, particularly after Musk jokingly shared an AI-altered post of himself in a bikini.

Over the past week, the issue has prompted threats of fines and bans in the EU, UK, and France, as well as investigations by the California attorney-general and Britain’s Ofcom regulator. Grok has also been banned in Indonesia and Malaysia.

On Wednesday, xAI took action to restrict the image-generation function on its Grok AI model to block the chatbot from undressing users, insisting that it removed Child Sexual Abuse Material (CSAM) and non-consensual nudity material.

St Clair, who has in recent months been increasingly critical of Musk, is also seeking a temporary restraining order to prevent xAI from generating images that undress her.

“Ms St Clair is humiliated, depressed, fearful for her life, angry and desperately in need of action from this court to protect her against xAI’s facilitation of this unfathomable nightmare,” lawyers wrote in a filing seeking the restraining order.

xAI filed a lawsuit against St Clair in Texas on Thursday, claiming she had breached the company’s terms of service by bringing her lawsuit against the company in a New York court instead of in Texas.

Earlier this week, Musk also said on X that he would be filing for “full custody” of their 1-year-old son Romulus, after St Clair apologized for sharing posts critical of transgender people in the past. Musk, who has a transgender child, has repeatedly been critical of transgender people and the rights of trans individuals.

Additional reporting by Kaye Wiggins in New York.

© 2026 The Financial Times Ltd. All rights reserved Not to be redistributed, copied, or modified in any way.

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Grok was finally updated to stop undressing women and children, X Safety says

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Grok scrutiny intensifies

California’s AG will investigate whether Musk’s nudifying bot broke US laws.

(EDITORS NOTE: Image contains profanity) An unofficially-installed poster picturing Elon Musk with the tagline, “Who the [expletive] would want to use social media with a built-in child abuse tool?” is displayed on a bus shelter on January 13, 2026 in London, England. Credit: Leon Neal / Staff | Getty Images News

Late Wednesday, X Safety confirmed that Grok was tweaked to stop undressing images of people without their consent.

“We have implemented technological measures to prevent the Grok account from allowing the editing of images of real people in revealing clothing such as bikinis,” X Safety said. “This restriction applies to all users, including paid subscribers.”

The update includes restricting “image creation and the ability to edit images via the Grok account on the X platform,” which “are now only available to paid subscribers. This adds an extra layer of protection by helping to ensure that individuals who attempt to abuse the Grok account to violate the law or our policies can be held accountable,” X Safety said.

Additionally, X will “geoblock the ability of all users to generate images of real people in bikinis, underwear, and similar attire via the Grok account and in Grok in X in those jurisdictions where it’s illegal,” X Safety said.

X’s update comes after weeks of sexualized images of women and children being generated with Grok finally prompting California Attorney General Rob Bonta to investigate whether Grok’s outputs break any US laws.

In a press release Wednesday, Bonta said that “xAI appears to be facilitating the large-scale production of deepfake nonconsensual intimate images that are being used to harass women and girls across the Internet, including via the social media platform X.”

Notably, Bonta appears to be as concerned about Grok’s standalone app and website being used to generate harmful images without consent as he is about the outputs on X.

Before today, X had not restricted the Grok app or website. X had only threatened to permanently suspend users who are editing images to undress women and children if the outputs are deemed “illegal content.” It also restricted the Grok chatbot on X from responding to prompts to undress images, but anyone with a Premium subscription could bypass that restriction, as could any free X user who clicked on the “edit” button on any image appearing on the social platform.

On Wednesday, prior to X Safety’s update, Elon Musk seemed to defend Grok’s outputs as benign, insisting that none of the reported images have fully undressed any minors, as if that would be the only problematic output.

“I [sic] not aware of any naked underage images generated by Grok,” Musk said in an X post. “Literally zero.”

Musk’s statement seems to ignore that researchers found harmful images where users specifically “requested minors be put in erotic positions and that sexual fluids be depicted on their bodies.” It also ignores that X previously voluntarily signed commitments to remove any intimate image abuse from its platform, as recently as 2024 recognizing that even partially nude images that victims wouldn’t want publicized could be harmful.

In the US, the Department of Justice considers “any visual depiction of sexually explicit conduct involving a person less than 18 years old” to be child pornography, which is also known as child sexual abuse material (CSAM).

The National Center for Missing and Exploited Children, which fields reports of CSAM found on X, told Ars that “technology companies have a responsibility to prevent their tools from being used to sexualize or exploit children.”

While many of Grok’s outputs may not be deemed CSAM, in normalizing the sexualization of children, Grok harms minors, advocates have warned. And in addition to finding images advertised as supposedly Grok-generated CSAM on the dark web, the Internet Watch Foundation noted that bad actors are using images edited by Grok to create even more extreme kinds of AI CSAM.

Grok faces probes in the US and UK

Bonta pointed to news reports documenting Grok’s worst outputs as the trigger of his probe.

“The avalanche of reports detailing the non-consensual, sexually explicit material that xAI has produced and posted online in recent weeks is shocking,” Bonta said. “This material, which depicts women and children in nude and sexually explicit situations, has been used to harass people across the Internet.”

Acting out of deep concern for victims and potential Grok targets, Bonta vowed to “determine whether and how xAI violated the law” and “use all the tools at my disposal to keep California’s residents safe.”

Bonta’s announcement came after the United Kingdom seemed to declare a victory after probing Grok over possible violations of the UK’s Online Safety Act, announcing that the harmful outputs had stopped.

That wasn’t the case, as The Verge once again pointed out; it conducted quick and easy tests using selfies of reporters to conclude that nothing had changed to prevent the outputs.

However, it seems that when Musk updated Grok to respond to some requests to undress images by refusing the prompts, it was enough for UK Prime Minister Keir Starmer to claim X had moved to comply with the law, Reuters reported.

Ars connected with a European nonprofit, AI Forensics, which tested to confirm that X had blocked some outputs in the UK. A spokesperson confirmed that their testing did not include probing if harmful outputs could be generated using X’s edit button.

AI Forensics plans to conduct further testing, but its spokesperson noted it would be unethical to test the “edit” button functionality that The Verge confirmed still works.

Last year, the Stanford Institute for Human-Centered Artificial Intelligence published research showing that Congress could “move the needle on model safety” by allowing tech companies to “rigorously test their generative models without fear of prosecution” for any CSAM red-teaming, Tech Policy Press reported. But until there is such a safe harbor carved out, it seems more likely that newly released AI tools could carry risks like those of Grok.

It’s possible that Grok’s outputs, if left unchecked, could have eventually put X in violation of the Take It Down Act, which comes into force in May and requires platforms to quickly remove AI revenge porn. One of the mothers of one of Musk’s children, Ashley St. Clair, has described Grok outputs using her images as revenge porn.

While the UK probe continues, Bonta has not yet made clear which laws he suspects X may be violating in the US. However, he emphasized that images with victims depicted in “minimal clothing” crossed a line, as well as images putting children in sexual positions.

As the California probe heats up, Bonta pushed X to take more actions to restrict Grok’s outputs, which one AI researcher suggested to Ars could be done with a few simple updates.

“I urge xAI to take immediate action to ensure this goes no further,” Bonta said. “We have zero tolerance for the AI-based creation and dissemination of nonconsensual intimate images or of child sexual abuse material.”

Seeming to take Bonta’s threat seriously, X Safety vowed to “remain committed to making X a safe platform for everyone and continue to have zero tolerance for any forms of child sexual exploitation, non-consensual nudity, and unwanted sexual content.”

This story was updated on January 14 to note X Safety’s updates.

Photo of Ashley Belanger

Ashley is a senior policy reporter for Ars Technica, dedicated to tracking social impacts of emerging policies and new technologies. She is a Chicago-based journalist with 20 years of experience.

Grok was finally updated to stop undressing women and children, X Safety says Read More »

hegseth-wants-to-integrate-musk’s-grok-ai-into-military-networks-this-month

Hegseth wants to integrate Musk’s Grok AI into military networks this month

agentic AI, AI, AI image generator, AI in education, AI regulation, AI security, Anthropic, Biz & IT, censorship, Deepfakes, Department of Defense, elon musk, Gemini, Google, grok, machine learning, openai, Pentagon, Pete Hegseth, Policy, xAI / /

On Monday, US Defense Secretary Pete Hegseth said he plans to integrate Elon Musk’s AI tool, Grok, into Pentagon networks later this month. During remarks at the SpaceX headquarters in Texas reported by The Guardian, Hegseth said the integration would place “the world’s leading AI models on every unclassified and classified network throughout our department.”

The announcement comes weeks after Grok drew international backlash for generating sexualized images of women and children, although the Department of Defense has not released official documentation confirming Hegseth’s announced timeline or implementation details.

During the same appearance, Hegseth rolled out what he called an “AI acceleration strategy” for the Department of Defense. The strategy, he said, will “unleash experimentation, eliminate bureaucratic barriers, focus on investments, and demonstrate the execution approach needed to ensure we lead in military AI and that it grows more dominant into the future.”

As part of the plan, Hegseth directed the DOD’s Chief Digital and Artificial Intelligence Office to use its full authority to enforce department data policies, making information available across all IT systems for AI applications.

“AI is only as good as the data that it receives, and we’re going to make sure that it’s there,” Hegseth said.

If implemented, Grok would join other AI models the Pentagon has adopted in recent months. In July 2025, the defense department issued contracts worth up to $200 million for each of four companies, including Anthropic, Google, OpenAI, and xAI, for developing AI agent systems across different military operations. In December 2025, the Department of Defense selected Google’s Gemini as the foundation for GenAI.mil, an internal AI platform for military use.

Hegseth wants to integrate Musk’s Grok AI into military networks this month Read More »

apps-like-grok-are-explicitly-banned-under-google’s-rules—why-is-it-still-in-the-play-store?

Apps like Grok are explicitly banned under Google’s rules—why is it still in the Play Store?

AI, ai nudes, Google, google play, grok, nudify apps, Tech, xAI / /

Elon Musk’s xAI recently weakened content guard rails for image generation in the Grok AI bot. This led to a new spate of non-consensual sexual imagery on X, much of it aimed at silencing women on the platform. This, along with the creation of sexualized images of children in the more compliant Grok, has led regulators to begin investigating xAI. In the meantime, Google has rules in place for exactly this eventuality—it’s just not enforcing them.

It really could not be more clear from Google’s publicly available policies that Grok should have been banned yesterday. And yet, it remains in the Play Store. Not only that—it enjoys a T for Teen rating, one notch below the M-rated X app. Apple also still offers the Grok app on its platform, but its rules actually leave more wiggle room.

App content restrictions at Apple and Google have evolved in very different ways. From the start, Apple has been prone to removing apps on a whim, so developers have come to expect that Apple’s guidelines may not mention every possible eventuality. As Google has shifted from a laissez-faire attitude to more hard-nosed control of the Play Store, it has progressively piled on clarifications in the content policy. As a result, Google’s rules are spelled out in no uncertain terms, and Grok runs afoul of them.

Google has a dedicated support page that explains how to interpret its “Inappropriate Content” policy for the Play Store. Like Apple, the rules begin with a ban on apps that contain or promote sexual content including, but not limited to, pornography. That’s where Apple stops, but Google goes on to list more types of content and experiences that it considers against the rules.

“We don’t allow apps that contain or promote content associated with sexually predatory behavior, or distribute non-consensual sexual content,” the Play Store policy reads (emphasis ours). So the policy is taking aim at apps like Grok, but this line on its own could be read as focused on apps featuring “real” sexual content. However, Google is very thorough and has helpfully explained that this rule covers AI.

Play Store policy

Recent additions to Google’s Play Store policy explicitly ban apps like Grok.

Credit: Google

Recent additions to Google’s Play Store policy explicitly ban apps like Grok. Credit: Google

The detailed policy includes examples of content that violate this rule, which include much of what you’d expect—nothing lewd or profane, no escort services, and no illegal sexual themes. After a spate of rudimentary “nudify” apps in 2020 and 2021, Google added language to this page clarifying that “apps that claim to undress people” are not allowed in Google Play. In 2023, as the AI boom got underway, Google added another line to note that it also would remove apps that contained “non-consensual sexual content created via deepfake or similar technology.”

Apps like Grok are explicitly banned under Google’s rules—why is it still in the Play Store? Read More »

x’s-half-assed-attempt-to-paywall-grok-doesn’t-block-free-image-editing

X’s half-assed attempt to paywall Grok doesn’t block free image editing

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So far, US regulators have been quiet about Grok’s outputs, with the Justice Department generally promising to take all forms of CSAM seriously. On Friday, Democratic senators started shifting those tides, demanding that Google and Apple remove X and Grok from app stores until it improves safeguards to block harmful outputs.

“There can be no mistake about X’s knowledge, and, at best, negligent response to these trends,” the senators wrote in a letter to Apple Chief Executive Officer Tim Cook and Google Chief Executive Officer Sundar Pichai. “Turning a blind eye to X’s egregious behavior would make a mockery of your moderation practices. Indeed, not taking action would undermine your claims in public and in court that your app stores offer a safer user experience than letting users download apps directly to their phones.”

A response to the letter is requested by January 23.

Whether the UK will accept X’s supposed solution is yet to be seen. If UK regulator Ofcom decides to move ahead with a probe into whether Musk’s chatbot violates the UK’s Online Safety Act, X could face a UK ban or fines of up to 10 percent of the company’s global turnover.

“It’s unlawful,” UK Prime Minister Keir Starmer said of Grok’s worst outputs. “We’re not going to tolerate it. I’ve asked for all options to be on the table. It’s disgusting. X need to get their act together and get this material down. We will take action on this because it’s simply not tolerable.”

At least one UK parliament member, Jess Asato, told The Guardian that even if X had put up an actual paywall, that isn’t enough to end the scrutiny.

“While it is a step forward to have removed the universal access to Grok’s disgusting nudifying features, this still means paying users can take images of women without their consent to sexualise and brutalise them,” Asato said. “Paying to put semen, bullet holes, or bikinis on women is still digital sexual assault, and xAI should disable the feature for good.”

X’s half-assed attempt to paywall Grok doesn’t block free image editing Read More »