2 Gen Z startup co-founders turn down Elon Musk’s multimillion-dollar offer to build AI to beat DeepSeek, OpenAI

After high school, Chen joined Wang at Tsinghua University in Beijing, where the duo created OpenChat, a lightweight language model trained on high-quality conversations and built to improve itself using reinforcement learning. OpenChat quickly gathered attention in academic circles, eventually catching the eye of Musk. Through xAI, he offered them a multimillion-dollar deal, which they turned down, the report stated.

“We decided that large-language models have their limitations,” Chen said. “We want a new architecture that will overcome the structural limitation of large-scale machine learning.”

Later, they created Sapient Intelligence and their new architecture, the Hierarchical Reasoning Model (HRM). HRM uses a dual recurrent structure designed to imitate human thought processes by blending deliberate reasoning with automatic, reflex-like responses, the report said.

In June, a 27-million-parameter prototype (a small AI model) reportedly outperformed major AI systems on abstract reasoning tasks, including advanced Sudoku, maze navigation, and the ARC-AGI benchmark. ARC-AGI or Abstraction and Reasoning Corpus – Artificial General Intelligence tests whether an AI can engage in reasoning as a human would.

“It was crazy,” Chen told Fortune. “Just with a change in the architecture, it gave the model a lot of what we call reasoning depth.”

With Sapient Intelligence, the duo is now setting its sights on artificial general intelligence.