In a significant development, Microsoft and OpenAI announced a new agreement that paves the way for OpenAI to transition into a for-profit public benefit corporation. This partnership will see Microsoft securing a 27% stake in the OpenAI Group PBC, valued at approximately $135 billion. Meanwhile, OpenAI’s nonprofit arm will hold a stake valued at $130 billion in the newly formed entity.
One noteworthy change from the prior agreement is that Microsoft will no longer possess the right of first refusal to act as OpenAI’s cloud provider. Nevertheless, OpenAI has committed to purchasing a substantial $250 billion worth of Azure services from Microsoft in the future.
Additionally, the agreement modifies the timeline for Microsoft’s rights to utilize OpenAI’s intellectual property (IP). Microsoft will maintain the rights to OpenAI’s models and products—excluding consumer hardware, which is currently in development with designer Jony Ive—through the year 2032. This provision also covers IP created after OpenAI declares it has achieved artificial general intelligence (AGI), a milestone that necessitates verification from an independent panel of experts.
Following the news, Microsoft’s shares experienced a roughly 2% increase. Key components of the agreement have been restructured: Microsoft will retain access to OpenAI’s models and products until 2032, but it will lose access to OpenAI’s research upon confirmation of AGI or by 2030, whichever arrives first. The revenue-sharing agreement between the two companies will also conclude upon AGI confirmation.
Moreover, OpenAI is now permitted to develop its products in collaboration with third parties, although API-related products will remain exclusive to Microsoft’s Azure cloud platform. In contrast, non-API products can utilize any cloud vendor available.
Another significant change allows Microsoft to pursue developing AGI independently. However, if Microsoft achieves this milestone using OpenAI’s technology before OpenAI does, it will be subject to specific compute limitations.
This new arrangement resolves a pivotal dilemma, as Microsoft was one of the last substantial adversaries to OpenAI’s transition into a for-profit entity, enabling progress in its plans. The fruitful collaboration between the two firms has been mutually beneficial; Microsoft has seen its stock price surge due to the substantial financial investments by OpenAI in its Azure services, while Microsoft has invested billions into OpenAI, solidifying their positions as frontrunners in the highly competitive AI landscape, outpacing rivals such as Amazon and Google.
