Elon Musk has told a US court that his artificial intelligence company, xAI, used models developed by OpenAI to help train its chatbot, Grok, confirming a controversial practice known as model distillation.
The disclosure came during Musk’s ongoing legal battle with OpenAI, where he is accusing the rival company of abandoning its original nonprofit mission. Under questioning, Musk acknowledged that xAI had “partly” relied on OpenAI systems in building Grok, describing the approach as standard within the AI industry.
Model distillation involves training a smaller or newer AI system by learning from the outputs of a more advanced model. This allows companies to replicate capabilities at lower cost without needing the same level of computing power or data.
The practice, however, sits in a legal and ethical gray area. While not explicitly illegal, it may violate the terms of service set by AI providers, especially if their systems are used without permission to train competing products.
Musk’s admission is notable given rising tensions among leading AI firms over intellectual property and competitive advantage. Companies such as OpenAI, Google, and Anthropic have been working to limit distillation by restricting how their models can be queried and monitored for suspicious usage patterns.
The issue has become more sensitive as newer entrants attempt to catch up with established players. By leveraging existing models, smaller firms can accelerate development and reduce costs, potentially eroding the lead built by companies that have invested heavily in infrastructure and research.
During his testimony, Musk also ranked the global AI landscape, placing Anthropic ahead of OpenAI and Google, while describing xAI as a relatively small player with only a few hundred employees.
The courtroom exchange highlights the broader conflict shaping the AI industry, where rapid innovation is colliding with questions about ownership, fairness, and competitive boundaries.
For OpenAI, the case underscores concerns that rivals may be benefiting from its technology without bearing the same development costs. For Musk and xAI, the admission reflects how common such practices have become in a fast moving sector where the race to build powerful AI systems is intensifying.
As the trial continues, the outcome could influence how courts and regulators treat the use of AI models in training competing systems, potentially setting new rules for one of the most contested areas in the technology industry.
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