OpenAI and Microsoft are engaged in complex negotiations to redefine the terms of their multibillion-dollar partnership — a critical step that could clear the way for the ChatGPT creator to restructure into a for-profit entity and pursue a future IPO, according to the Financial Times.
At the center of the talks is Microsoft’s role as OpenAI’s largest backer, having invested over $13 billion into the AI research lab turned tech powerhouse. The discussions aim to strike a delicate balance: enabling OpenAI to adopt a more conventional corporate structure — specifically a public benefit corporation (PBC) — while preserving Microsoft’s privileged access to OpenAI’s cutting-edge artificial intelligence models and intellectual property.
According to people familiar with the matter, Microsoft is willing to trade some of its equity stake in OpenAI’s planned for-profit arm in exchange for guaranteed access to AI technologies developed beyond the current contract’s 2030 expiry. That contract, originally signed in 2019, governs revenue-sharing terms and Microsoft’s rights to use OpenAI’s IP in products like Copilot, embedded in Microsoft Office and Azure.
The outcome of these negotiations could reshape the future of a company at the forefront of large language model development. OpenAI, founded in 2015 as a non-profit dedicated to ensuring AI benefits humanity, has increasingly moved toward a commercial model. CEO Sam Altman has made no secret of his ambition to build artificial general intelligence (AGI) — AI systems more capable than humans — and doing so, he argues, requires vast financial resources.
OpenAI had previously considered removing its non-profit board’s final say over the business arm but reversed course after internal and external criticism. Nevertheless, it is continuing with plans to convert its business into a PBC — a model adopted by rivals such as Anthropic and Elon Musk’s xAI — which allows companies to raise capital while maintaining a public-interest mission.
The Financial Times notes that recent investment rounds have raised billions, including a $6.6 billion round led by Microsoft, SoftBank, and top VCs in October 2023, and another $40 billion led by SoftBank in March. However, these investments came with conditions: if OpenAI fails to complete its PBC conversion, investors can claw back capital, making a successful restructuring essential.
Tensions between the two companies have reportedly escalated as OpenAI seeks greater autonomy. The AI start-up has approached other partners, including Oracle and SoftBank, to help build “Stargate,” a massive new computing infrastructure, potentially reducing its dependence on Microsoft’s cloud services. One Microsoft executive told the Financial Times, “OpenAI says to Microsoft ‘give us money and compute and stay out of the way’… that is a bad partner attitude.”
Despite these frictions, both sides remain committed to reaching an agreement. “It’s not like it’s all gone to hell,” said a person close to OpenAI. “There’s a tough negotiation but we’re confident we’ll get it done.”
Even with Microsoft’s cooperation, OpenAI must still gain approval from authorities in Delaware and California, where it is incorporated and headquartered, to proceed with its restructuring. Delaware Attorney General Kathy Jennings announced a formal review of the plan to ensure it upholds OpenAI’s original charitable mission and maintains adequate nonprofit oversight.
Critics, including former co-founder Elon Musk, have argued the move would betray OpenAI’s founding principles. Musk’s attorney described the shift as a transfer of public assets to private hands, benefitting executives like Altman. Legal experts warn that failure to satisfy regulators or investors could severely limit OpenAI’s ability to raise further funds or challenge rivals like Google.
As Columbia Law School professor Dorothy Lund told the Financial Times, “When you’re a mission-driven company which needs money from investors, you are in a dangerous position… You want your investors to keep giving you huge billion-dollar cheques, so you need to keep them happy.”
