Microsoft and OpenAI have signed a non-binding agreement, allowing OpenAI to move ahead with plans to become a for-profit entity.
OpenAI is restructuring its governance and business model allowing for more flexibility in raising capital and managing its operations.
This development comes as OpenAI is preparing to shift from its existing capped-profit hybrid model to a more standard corporate structure. The change aims to enable capital raises and potential public market access, as OpenAI’s valuation crosses $500 billion in private fundraising discussions.
As OpenAI’s revenue grows, it is seeking diversified cloud partnerships to meet increased compute demands. The revised structure provides OpenAI with flexibility in securing infrastructure deals and global scaling. Microsoft, in return, is aiming to maintain access to OpenAI’s models, particularly in scenarios where the models reach artificial general intelligence (AGI), which under current terms would terminate the existing partnership.
OpenAI’s nonprofit arm expects to receive over $100 billion under the updated structure, which equates to around 20% of the valuation OpenAI is targeting. Regulatory approval from attorneys general in California and Delaware is still pending. The company intends to complete the restructuring by year-end to avoid disruptions to ongoing funding.
Microsoft initially invested $1 billion in OpenAI in 2019, followed by another $10 billion in 2023. Under the existing agreement, Microsoft had exclusive rights to commercialise OpenAI’s software tools through its Azure platform. Microsoft also served as OpenAI’s sole compute provider. However, those restrictions were relaxed earlier this year, with OpenAI beginning independent infrastructure development, including its Stargate data centre, supported by long-term cloud agreements with Oracle and Google.
