Microsoft and OpenAI Strike New Deal to Reshape Partnership

Picture Credit: Financial Times

Microsoft and OpenAI have signed a non-binding agreement to redefine their relationship, paving the way for OpenAI to restructure into a for-profit company and pursue an eventual public listing. The move marks a significant shift in one of the most high-profile partnerships in artificial intelligence.

While financial details were not disclosed, both companies confirmed they are finalizing a definitive deal that would allow OpenAI to raise fresh capital under a conventional governance model. The company is targeting a $500 billion private market valuation, with its nonprofit arm set to receive more than $100 billion in funding — making it one of the world’s richest nonprofits.

Microsoft, which first invested $1 billion in 2019 and another $10 billion in 2023, previously held exclusive rights to sell OpenAI’s technology through Azure and enjoyed preferred access to its tools. That exclusivity has loosened as OpenAI pushes forward with its own massive data center project, Stargate, and new cloud partnerships with Oracle and Google worth hundreds of billions.

The new structure could also help OpenAI expand its sales and secure the computing power needed to keep pace with soaring demand for AI services. However, regulatory approval from California and Delaware attorneys general is still required, and OpenAI risks losing billions in funding if the conversion isn’t completed by year’s end.

For Microsoft, the key challenge will be maintaining access to OpenAI’s cutting-edge models, especially as both companies increasingly compete in AI products, from enterprise tools to consumer chatbots. The reworked agreement is designed to safeguard Microsoft’s access even if OpenAI declares its models have achieved humanlike intelligence — a milestone that would otherwise end the current partnership.