OpenAI Finalizes For-Profit Plans, Microsoft Gets 27% Stake Worth $135 Billion
The agreement clears a major obstacle for OpenAI's business plans. OpenAI has spent much of this year working to restructure as a more traditional for-profit company.
Microsoft Corp. and OpenAI finalized a new agreement in a long-negotiated partnership, removing a layer of uncertainty for both companies’ investors and paving the way for the ChatGPT maker to restructure as a for-profit business.
Under the revised pact, Microsoft will get a 27% ownership stake in OpenAI worth about $135 billion, the companies said in a statement Tuesday. In addition, Microsoft will have access to the artificial intelligence startup’s technology until 2032, including models that achieved the benchmark of artificial general intelligence (AGI).
The agreement clears a major obstacle for OpenAI’s business plans. OpenAI has spent much of this year working to restructure as a more traditional for-profit company. Microsoft, which backed OpenAI with some $13.75 billion, was the biggest holdout among the ChatGPT maker’s investors, Bloomberg News has reported.
“OpenAI has completed its recapitalization, simplifying its corporate structure,” said Bret Taylor, OpenAI’s chairman, in a statement. “The nonprofit remains in control of the for-profit, and now has a direct path to major resources before AGI arrives.”
OpenAI nonprofit entity, dubbed the OpenAI Foundation, is also set to receive an equity stake worth roughly $130 billion as part of its corporate restructuring. The foundation plans to initially focus on funding work to “accelerate health breakthroughs,” among other efforts.
Microsoft shares jumped almost 4% in early trading. Many on Wall Street have cited the changing OpenAI relationship as a serious point of uncertainty for the software maker.
One major sticking point in the monthslong negotiations between Microsoft and OpenAI had been what happened once OpenAI had achieved AGI, or AI that outperforms humans at most economically useful tasks. Under the new agreement, the threshold must be verified by an “independent expert panel.” Once achieved, Microsoft will no longer get a cut of OpenAI’s revenue.
Microsoft is also losing its right of first refusal on new cloud infrastructure business from OpenAI. Azure had long been OpenAI’s exclusive provider, but Microsoft began allowing it to seek out services from other vendors like Oracle Corp. as long as it had an option to the business first. OpenAI will make an additional $250 billion commitment to Azure.
OpenAI’s restructuring plans had faced other complications, including regulatory scrutiny and a lawsuit filed by Elon Musk, an early backer who split with the company and accused the startup of defrauding investors about its commitment to its charitable mission.
Microsoft’s access to OpenAI’s technology will not include consumer hardware, the companies said. OpenAI will also have the ability to “jointly develop some products with third parties.”
