Microsoft and OpenAI Reshape Partnership as AI Startup Moves Toward For-Profit Model
Microsoft and OpenAI have announced a new non-binding agreement that sets the stage for OpenAI’s restructuring into a for-profit company, marking a major shift in one of the most high-profile partnerships in artificial intelligence.
While the companies did not share specific details of the revised commercial terms, they confirmed that negotiations are ongoing to finalize a definitive agreement. The move signals OpenAI’s push to adopt a more conventional corporate structure as it seeks to raise new capital, broaden partnerships, and potentially go public to fund its rapid expansion of AI.
A Partnership That Transformed AI
Microsoft initially invested $1 billion in OpenAI in 2019, followed by an additional $10 billion in early 2023. Under the original agreement, Microsoft secured exclusive rights to distribute OpenAI’s software through its Azure cloud platform and gained privileged access to the company’s groundbreaking AI models.
However, this arrangement has evolved. Earlier this year, Microsoft loosened its exclusive hold, enabling OpenAI to pursue its own large-scale data center project, known as Stargate. OpenAI also struck massive infrastructure deals, including $300 billion in long-term contracts with Oracle and an additional cloud partnership with Google.
With OpenAI’s revenue now scaling into the billions, the company is seeking a governance structure more typical of publicly traded tech firms—while diversifying its cloud partnerships to meet skyrocketing demand for computing power.
What’s at Stake for Microsoft
For Microsoft, maintaining strong ties with OpenAI remains crucial. The tech giant is aiming to secure ongoing access to OpenAI’s cutting-edge models—even if OpenAI one day declares its systems have reached artificial general intelligence (AGI), a milestone that would otherwise terminate their current deal.
At the same time, Microsoft is hedging its bets by building its own AI models, reducing its reliance on OpenAI while continuing to integrate GPT-powered tools across products like Office, Azure, and Bing.
OpenAI’s Nonprofit Arm and Funding Goals
According to a memo from Bret Taylor, chair of OpenAI’s nonprofit board, the nonprofit entity is expected to receive over $100 billion—roughly 20% of the $500 billion valuation OpenAI is targeting in private markets. That would make OpenAI’s nonprofit one of the best-funded organizations of its kind.
Still, key questions remain unanswered, including how much of OpenAI Microsoft will ultimately own and whether it will retain special rights to OpenAI’s most advanced technologies.
Regulatory Approval Needed
OpenAI’s restructuring is not yet finalized. Attorneys general in California and Delaware must approve the company’s conversion to a for-profit structure. Executives hope to complete the process by the end of the year, since billions in fresh funding are contingent on that timeline.
Competition and the Future of AI
Even as partners, Microsoft and OpenAI increasingly compete in overlapping areas—from consumer-facing chatbots to enterprise-grade AI tools. This evolving relationship underscores the broader race to dominate the global AI market, where cloud infrastructure, cutting-edge models, and computing scale are the new battlegrounds.