Microsoft to retain 27% stake in OpenAI worth $135 bn after restructuring

Microsoft's new agreement with OpenAI follows its shift to a for-profit model under OpenAI Group PBC, redefining IP rights, AGI clauses and Azure service commitments

Microsoft will now hold a 27 per cent stake in OpenAI following a new definitive agreement between the two companies, the tech giants announced in a statement on Tuesday.

 

The deal, which marks a shift in their partnership, follows the restructuring of OpenAI into a for-profit company called OpenAI Group public benefit corporation (PBC). The OpenAI Foundation, its nonprofit entity, holds equity in the for-profit currently valued at approximately $130 billion, said Bret Taylor, chair of the OpenAI board of directors.

 

Under the agreement, Microsoft’s investment in the newly formed OpenAI Group PBC is valued at about $135 billion. Prior to the recapitalisation and new funding rounds, Microsoft’s stake in OpenAI’s for-profit entity stood at 32.5 per cent, the statement said.

 

Partnership and rights structure

Microsoft said the agreement preserves the “key elements” of their partnership, while allowing it to retain exclusive rights to OpenAI’s technology and Azure integration until the development of Artificial General Intelligence (AGI). OpenAI defines AGI as AI systems that are generally smarter than humans.

 

However, the agreement also redefines several aspects of intellectual property (IP), product development and commercial collaboration.

 

Microsoft’s IP rights for models and products will continue through 2032, extending to post-AGI models subject to safety conditions, the statement said. “Once AGI is declared by OpenAI, that declaration will now be verified by an independent expert panel,” it added.

 

Microsoft’s research-related IP rights will remain until 2030 or AGI verification, whichever occurs first, excluding model architecture, weights, inference and fine-tuning code, and data-centre technology.

 

OpenAI’s flexibility and collaboration terms

Under the reworked deal, OpenAI also gains flexibility to work with third parties on both API and non-API products. However, API products developed with third parties will be exclusive to Azure, Microsoft’s cloud computing platform. “Non-API products may be served on any cloud provider,” the statement said.

 

Similarly, Microsoft will have the freedom to independently pursue AGI alone or in partnership with third parties. “If Microsoft uses OpenAI’s IP to develop AGI prior to AGI being declared, the models will be subject to compute thresholds; those thresholds are significantly larger than the size of systems used to train leading models today,” the companies stated.

 

Microsoft’s IP rights now exclude OpenAI’s consumer hardware.

 

Azure commitments and financial terms

 

The agreement also noted that OpenAI has committed to purchase an additional $250 billion worth of Azure services. However, Microsoft will no longer hold the right of first refusal as its compute provider.

 

The new arrangement maintains the long-term collaboration between the two companies while granting both greater operational flexibility as they advance towards AGI development.