OpenAI and Microsoft are negotiating new terms for their billion-dollar partnership. The talks are intended to pave the way for a future IPO of the ChatGPT creator. A key point of discussion is how many shares Microsoft will receive in exchange for the more than $13 billion (€11.7 billion) it has already invested.
This is according to the Financial Times, citing sources. The negotiations relate to the contract that was originally drawn up in 2019 and runs until 2030. This contract regulates Microsoft’s access to OpenAI’s intellectual property, such as models and products, and a share of revenue from product sales.
According to insiders, Microsoft is willing to give up part of its stake in OpenAI’s new for-profit arm in exchange for access to technology developed after 2030. This deal is essential to OpenAI’s restructuring plans.
From non-profit to publicly traded company
OpenAI was founded in 2015 as a non-profit organization by Sam Altman and Elon Musk. In 2019, the company launched a profitable subsidiary in which external parties could invest in exchange for a share of future profits, up to a certain limit.
CEO Sam Altman has stated that his goal is to build artificial general intelligence, systems that surpass human capabilities. To achieve this, OpenAI raised $6.6 billion last October from investors such as SoftBank, Microsoft, and various venture capital funds. In March, another $40 billion followed in a round led by SoftBank.
OpenAI recently abandoned controversial plans to remove ultimate control of the company from its non-profit board. However, it is sticking to its plan to transform its commercial arm into a public benefit corporation, a business form that pursues social good alongside profit. This model is also used by competitors Anthropic and xAI.
Tensions in the partnership
Growing tensions between the companies are complicating the negotiations. Although they work closely together—Microsoft has integrated OpenAI’s technology into its software products and provides computing power for training AI models—OpenAI’s ambitions have changed.
The startup increasingly focuses on business customers with AI products and is looking for partners such as SoftBank and Oracle to build its own computer infrastructure, called “Stargate.” According to sources with direct knowledge of the relationship, this has led to friction with Microsoft.
“The friction comes partly due to style. OpenAI says to Microsoft ‘gives us money and compute and stay out of the way: be happy to be on the ride with us.’ So naturally this leads to tensions,” said a senior Microsoft employee. “To be honest, that is a bad partner attitude, it shows arrogance.”
Despite these challenges, a person close to OpenAI says, “Microsoft still wants [this conversion] to succeed. It’s not like it’s all gone to hell and it’s open warfare. There’s a tough negotiation but we’re confident we’ll get it done.”
It is crucial that this restructuring succeeds for OpenAI. According to a source close to OpenAI, the requirement to move to a more conventional profit-driven structure is a high-level recognition of what it takes to raise this amount of money. Raising $40 billion under a capped profit structure is not feasible.