Microsoft and OpenAI have signed a non-binding agreement allowing OpenAI to restructure itself into a for-profit company, marking a significant development in their high-profile partnership. This move is part of OpenAI's efforts to raise capital under a more conventional governance structure and eventually go public to fund artificial intelligence development.
The deal would give OpenAI's nonprofit arm a stake valued at over $100 billion, representing approximately 20% of OpenAI's $500 billion valuation in private markets. This would make the nonprofit one of the most well-funded philanthropic organizations globally. Microsoft, OpenAI's largest investor, has invested $1 billion in 2019 and an additional $10 billion in 2023.
The restructuring still requires regulatory approval from California and Delaware attorneys general, which is expected to be completed by year's end. Failure to meet this deadline could result in OpenAI losing billions in funding. Meanwhile, Microsoft wants continued access to OpenAI's technology, even if OpenAI declares its models have reached human-like intelligence, a milestone that would end the current partnership under existing terms.
OpenAI's partnership with Microsoft has evolved over time, with OpenAI seeking greater independence and exploring deals with other cloud providers, including a $300 billion deal with Oracle and another cloud deal with Google. This shift reflects OpenAI's growing ambitions and its need for more computing capacity to meet demand.
