OpenAI restructures giving Microsoft 27% stake in public benefit entity
Microsoft now holds an approximately 27% stake in the reorganised entity, valued at about $135 billion on an as-converted diluted basis.
OpenAI has restructured its business, converting its for-profit arm into a public benefit corporation (PBC) as part of a new agreement that reshapes its long-running partnership with Microsoft.
Under the deal, Microsoft now holds an approximately 27% stake in the reorganised entity, valued at about $135 billion on an as-converted diluted basis. The tech giant previously owned around 32.5% of OpenAI’s for-profit arm before the restructuring, but retains a central role as the company’s strategic partner.
The recapitalisation creates OpenAI Group PBC, aligning the company’s commercial operations more closely with its founding mission to ensure that artificial general intelligence (AGI) benefits humanity.
“OpenAI has completed its recapitalization, simplifying its corporate structure. The nonprofit remains in control of the for-profit, and now has a direct path to major resources before AGI arrives,” Bret Taylor, Chair of the OpenAI Board of Directors, said in a blog post.
“The nonprofit, now called the OpenAI Foundation, holds equity in the for-profit currently valued at approximately $130 billion,” he added.
The deal also sets out a series of technical, commercial and governance changes intended to frame how the partners will act should AGI be achieved.
Microsoft will remain OpenAI’s frontier model partner and will keep exclusive rights to certain intellectual property and Azure API exclusivity until OpenAI declares AGI. New safeguards include an independent expert panel to verify any claim that OpenAI has created AGI, time limited access for Microsoft to confidential research methods through 2030 unless AGI is verified earlier, and an extension of Microsoft’s model and product IP rights through 2032 with stated safety guardrails.
The agreement also explicitly excludes OpenAI consumer hardware from Microsoft’s IP rights. Earlier this year, OpenAI acquired io Products, the design studio founded by former Apple design chief Jony Ive for $6.5 billion, in a move widely seen as signalling OpenAI’s ambitions to develop its own consumer hardware.
OpenAI may now collaborate with third parties to develop some products, with any API products created jointly remaining exclusive to Azure while non API products can run on other clouds.
The ChatGPT maker has also contracted to purchase an incremental $250 billion of Azure services, and Microsoft will no longer hold a right of first refusal to be OpenAI’s compute provider.
Meanwhile Microsoft may independently pursue AGI research either alone or with other partners. The pact allows OpenAI to provide API access to United States national security customers regardless of cloud provider and permits the release of open weight models that meet specified capability criteria.
The relationship between the two tech firms began with a widely reported $1 billion investment in 2019 that made Azure OpenAI’s preferred cloud partner and established deep technical co-operation. Subsequent rounds and commercial commitments culminated in a multiyear expansion announced in January 2023.
Reports indicate Microsoft’s cumulative commitments to OpenAI amounting to roughly $13 billion to $14 billion prior to the current recapitalisation, a figure that has been referenced in multiple outlets and was central to recent antitrust reviews.
For OpenAI the new structure gives it greater freedom to raise capital, to work with multiple partners and to publish models under defined conditions while preserving oversight through its nonprofit parent and the newly asserted public benefit orientation.
Edited by Jyoti Narayan