Microsoft To Redefine Ties With OpenAI As ChatGPT Maker Prepares Major Restructure

Microsoft and OpenAI have agreed to overhaul their partnership. This will pave the way for OpenAI to restructure into a for-profit company while Microsoft accelerates its own artificial intelligence ambitions.

The two companies announced on Sept. 11 that they had signed a non-binding memorandum of understanding (MoU) to set the framework for the “next phase” of their alliance. Details of the revised commercial arrangements were not made public, but both parties said they were working towards a definitive agreement.

In a joint statement, the companies said, “OpenAI and Microsoft have signed a non-binding memorandum of understanding (MOU) for the next phase of our partnership. We are actively working to finalise contractual terms in a definitive agreement. Together, we remain focused on delivering the best AI tools for everyone, grounded in our shared commitment to safety.”

According to Reuters, Microsoft first invested $1 billion in OpenAI in 2019, followed by a further $10 billion in early 2023. Under the arrangement, Microsoft enjoyed exclusive rights to distribute OpenAI’s software through its Azure cloud services and had priority access to its cutting-edge models.

That dominance began to ease this year. OpenAI launched its own large-scale data centre project, codenamed Stargate. It has also signed long-term deals worth $300 billion with Oracle, as well as a separate cloud agreement with Google.

With revenues now running into billions, OpenAI is looking to adopt a more conventional corporate structure to attract fresh investment and potentially go public, according to Reuters. The company also hopes to partner with a wider range of cloud providers.

While OpenAI pursues independence, Microsoft is working to reduce its reliance on the ChatGPT maker. The tech giant has been developing its own AI models and wants to ensure continued access to OpenAI’s technology even if the start-up eventually declares that its models have achieved human-level intelligence, reported Reuters.

OpenAI’s nonprofit arm stands to benefit significantly from the restructuring. According to a memo from Bret Taylor, chair of OpenAI’s nonprofit board, cited by Reuters, the nonprofit is expected to receive over $100 billion, around 20% of the $500 billion valuation the company is seeking in private markets.

The companies have not disclosed how much of OpenAI Microsoft will ultimately own or whether the software giant will continue to enjoy exclusive access to the latest AI models.

OpenAI’s plans still require approval from regulators, including the attorneys general of California and Delaware, Reuters reported. The company aims to finalise the conversion by the end of the year.