Microsoft and OpenAI have recently announced a transformative agreement, leading to the restructuring of the ChatGPT creator into a public benefit corporation with a valuation of $500 billion. This move sets the stage for OpenAI to go public. As part of the deal, Microsoft will secure a 27% stake, approximately $135 billion, in OpenAI Group PBC. The oversight of this new structure will fall under the OpenAI Foundation, a non-profit entity.
This development eliminates a significant barrier for OpenAI in terms of capital raising. Initially established as a non-profit organization focusing on AI safety, OpenAI had inked a deal with Microsoft back in 2019, granting the tech giant rights to a substantial portion of its work in exchange for cloud computing services. The market responded positively to the news, with Microsoft’s shares climbing by 4% post-announcement. Analysts predict that this move could expedite OpenAI’s journey towards going public.
Under the binding agreement, the collaboration between Microsoft and OpenAI is set to continue until at least 2032 through an extensive cloud computing contract. Microsoft will retain specific rights to OpenAI products and AI models, even in the event of OpenAI achieving artificial general intelligence (AGI). Unlike the previous agreement, the new deal mandates an impartial panel to validate any claims by OpenAI regarding AGI attainment.
Bret Taylor, chair of the OpenAI Foundation’s board, highlighted the completion of OpenAI’s recapitalization and streamlining of its corporate framework. This move ensures that the non-profit maintains control over the for-profit entity and secures access to significant resources ahead of the AGI era. Microsoft’s investment in OpenAI has totaled $13.8 billion to date, with the recent deal expected to yield a return nearly ten times the initial investment.
Commenting on the agreement, Gil Luria, head of technology research at DA Davidson, emphasized that the new structure resolves the longstanding organizational challenges faced by OpenAI and clarifies ownership rights over its technology vis-Ã -vis Microsoft. This enhanced clarity is anticipated to facilitate OpenAI’s fundraising efforts.
In addition, OpenAI will invest $250 billion in Azure cloud computing services, marking a significant commitment. As part of this arrangement, Microsoft will relinquish its right of first refusal for providing computing services to OpenAI. Moreover, Microsoft clarified that it will not retain any rights to hardware developed by OpenAI. Notably, OpenAI recently acquired io Products, a start-up founded by former Apple design chief Jony Ive, in a deal valued at $6.5 billion.