Microsoft, OpenAI reach preliminary understanding on new partnership terms

OpenAI is preparing a major structural shift: the company plans to reestablish itself as a for-profit business. A key step toward that goal came this week, as Microsoft agreed in principle to adjust the terms of their partnership.

The tentative deal clears the way for OpenAI to move forward with its long-planned transition into a Public Benefit Corporation. As part of the restructuring, OpenAI's nonprofit parent organization will receive a stake in the new company valued at more than $100 billion. Board chair Bret Taylor described the nonprofit as one of the "best-funded philanthropic organizations in the world." According to the New York Times, the nonprofit's stake would amount to over 20 percent of the business. In a recent secondary sale, OpenAI itself was valued at $500 billion.

Microsoft's cooperation was considered essential for the restructuring. Between 2019 and 2023, the company invested over $13 billion in OpenAI, securing nearly half of future profits in return. That agreement made it difficult for OpenAI to shift toward a standard for-profit structure. The new contract, currently just a non-binding memorandum of understanding, would rewrite key terms, including financial arrangements, technology sharing, and revenue allocation.

One clause that remains, though modified, is the controversial AGI provision. If OpenAI ever declares it has achieved Artificial General Intelligence, Microsoft would immediately lose access to its most powerful models. The exact changes to the clause have not yet been disclosed.