California: Microsoft (MSFT.O) and OpenAI have announced that they have signed a non-binding agreement setting new relationship terms, paving the way for OpenAI to restructure into a for-profit entity.
The move signals a new phase in one of the most high-profile partnerships fuelling the global AI boom. While financial details of the revised commercial terms were not disclosed, both companies confirmed they are working toward finalising a definitive agreement.
The talks represent a crucial step as OpenAI seeks to adopt a more conventional corporate governance structure, raise fresh capital, and eventually pursue a public listing to fund its rapid AI development. Microsoft, which initially invested $1 billion in OpenAI in 2019 and subsequently $10 billion in early 2023, previously held exclusive rights to sell OpenAI’s software tools through its Azure cloud platform. It also enjoyed preferential access to the startup’s technology.
Earlier this year, however, Microsoft’s exclusive status was relaxed, enabling OpenAI to advance its independent data centre project, ‘Stargate,’ which includes $300 billion in long-term contracts with Oracle and a separate cloud deal with Google.
With revenues now in the billions, OpenAI is pushing to diversify its cloud partnerships and secure greater computing capacity to meet surging global demand. Microsoft, meanwhile, is seeking continued access to OpenAI’s cutting-edge models, even if OpenAI declares its technology has reached artificial general intelligence (AGI) — a milestone that, under current terms, would dissolve the existing partnership.
According to a memo from Bret Taylor, chairman of OpenAI’s nonprofit board, the nonprofit arm would receive more than $100 billion, approximately 20 percent of the $500 billion valuation OpenAI is targeting in private markets, making it one of the most well-funded nonprofits in history.
Uncertainties remain, however. The new structure requires approval from attorneys general in California and Delaware, with OpenAI aiming to complete the transition by the end of the year to avoid losing billions in potential funding.
Both companies continue to compete across several fronts, from consumer-facing chatbots to enterprise AI solutions. Microsoft has also accelerated efforts to develop its own models to reduce reliance on OpenAI’s technology.
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