Microsoft and OpenAI have signed a preliminary agreement that will enable the AI developer to transform itself into a commercial enterprise. This marks a new step in the intensive collaboration between the two partners.
The deal is not yet final, and details about the commercial agreements are lacking, according to Reuters. However, both companies emphasize that they are working on a binding agreement. For OpenAI, the restructuring is a way to raise capital under a more traditional form of governance and prepare for a possible IPO.
Microsoft invested $1 billion in the company in 2019 and added another $10 billion in early 2023. Until now, the software giant had the exclusive right to sell OpenAI’s models and tools through the Azure platform and had preferential access to the technology. This exclusivity has recently been partially relinquished, allowing OpenAI to build its own infrastructure. This includes the Stargate data center project, for which the company has signed contracts worth hundreds of billions of dollars with Oracle and Google, among others.
The growth in revenue to billions of dollars requires a broader business structure and collaboration with multiple cloud parties. In this way, OpenAI wants to guarantee sufficient capacity to continue to meet the strong demand for AI services. Meanwhile, Microsoft is seeking continued access to OpenAI’s technology.
OpenAI’s non-profit arm will continue to play a role in the new structure. According to internal documents, this branch would eventually receive more than $100 billion, accounting for about one-fifth of the total valuation the company is seeking in the private market. This would make it one of the best-funded non-profit organizations in the world.
Long-running dispute with Musk
The way OpenAI is required to operate previously led to a long-running controversy with Elon Musk. Musk was once part of OpenAI’s original founding team, but filed a lawsuit in the spring of last year. At the time, he indicated that he wanted the company to return to its original mission of developing artificial general intelligence for the benefit of humanity, rather than pursuing profit.
It is still unclear what stake Microsoft will retain in OpenAI in the future and whether it will have exclusive access to the latest generations of models. At the same time, the companies also compete with each other: both in consumer chatbots and in AI solutions for businesses, while Microsoft is developing its own models to be less dependent on its partner. In addition, the company announced this week that it is expanding its use of artificial intelligence by integrating Anthropic’s technology into Office 365 in addition to OpenAI.
Before the restructuring can be completed, regulators in California and Delaware must still give their approval. OpenAI aims to implement the new structure before the end of this year. If the deadline is not met, the company risks losing out on significant funding.