Microsoft-OpenAI partnership: Microsoft and OpenAI have reached a landmark agreement allowing the ChatGPT maker to restructure as a public benefit corporation (PBC), valuing OpenAI at $500 billion and granting it more operational freedom. The deal removes a major constraint on raising capital that has existed since 2019, when OpenAI signed an agreement with Microsoft giving the tech giant rights over much of OpenAI’s work in exchange for cloud computing services.
Under the new structure, Microsoft will hold a stake of about $135 billion, or 27%, in OpenAI Group PBC, which will be controlled by the OpenAI Foundation, a nonprofit entity. The Redmond-based firm has invested $13.8 billion in OpenAI, and the recent deal implies Microsoft has realized nearly ten times its investment. Following the announcement, Microsoft shares rose 2.5%, pushing its market value past $4 trillion.
Cloud Contracts, AGI Oversight, and Innovation Path
The agreement keeps the two companies closely linked until at least 2032 through a massive Azure cloud computing contract, while Microsoft retains some rights to OpenAI products and AI models, even if the company reaches artificial general intelligence (AGI).
“OpenAI has completed its recapitalization, simplifying its corporate structure,” Bret Taylor, the OpenAI Foundation’s board chair, said in a blog post. “The nonprofit remains in control of the for-profit, and now has a direct path to major resources before AGI arrives.”
The deal addresses previous limitations on OpenAI’s ability to raise funds from outside investors, which became a growing concern as ChatGPT’s user base surged past 700 million weekly users by September. Analysts note that the new structure also resolves ownership ambiguities with Microsoft, offering a clearer pathway for future innovation and fundraising.
“OpenAI still faces ongoing scrutiny around transparency, data usage, and safety oversight. But overall, this structure should provide a clearer path forward for innovation and accountability,” said Adam Sarhan, CEO of 50 Park Investments.
Gil Luria, head of technology research at DA Davidson, added, “The new structure should provide more clarity on OpenAI’s investment path, thus facilitating further fundraising.”
Terms of the Microsoft-OpenAI Partnership
As part of the agreement, OpenAI will purchase $250 billion of Azure cloud computing services from Microsoft, and the tech giant will no longer have a right of first refusal for these services. Microsoft also confirmed it will have no rights to any hardware produced by OpenAI. In a separate move, OpenAI acquired longtime Apple design chief Jony Ive’s startup, io Products, for $6.5 billion earlier this year.
The restructuring marks a pivotal moment in OpenAI’s evolution, balancing commercial growth with nonprofit oversight and preparing the company for a future that could include AGI development.
