OpenAI Goes For-Profit and Microsoft Owns 27 Percent

OpenAI announced today that its “recapitalization” is complete, with a non-profit named the OpenAI Foundation controlling a new for-profit business named OpenAI Group PBC (public benefit corporation). Microsoft owns approximately 27 percent of OpenAI Group PBC, with its stake currently valued at about $135 billion given OpenAI’s most recent valuation.

“We’ve signed a new definitive agreement with OpenAI that builds on our foundation, strengthens our partnership, and sets the stage for long-term success for both organizations,” the Microsoft announcement explains. “The agreement preserves key elements that have fueled this successful partnership – meaning OpenAI remains Microsoft’s frontier model partner and Microsoft continues to have exclusive IP rights and Azure API exclusivity until Artificial General Intelligence (AGI).”

“The OpenAI Foundation controls the for-profit business, which was established in 2019, keeping our mission at the center,” OpenAI says of its recapitalization. “The for-profit is now a public benefit corporation, called OpenAI Group PBC—with the same mission as the OpenAI Foundation—which ensures the company’s mission and commercial success advance together.”

A lot has changed in the Microsoft/OpenAI partnership, and each says they will “independently continue advancing innovation and growth.” Key changes to the partnership include:

• Microsoft has intellectual property (IP) rights to OpenAI’s models and products through 2032, including post-AGI models with appropriate safety guardrails.
• When OpenAI declares it has achieved AGI, that claim will be verified by a third party expert panel.
• The revenue share agreement remains in place until the expert panel verifies AGI, though payments will be made over a longer period of time.
• Microsoft’s IP rights to the confidential research that OpenAI undergoes in the development of its models and systems will remain in place through 2030 or when an independent expert panel confirms that OpenAI has achieved AGI, whichever comes first.
• Microsoft’s IP rights now exclude OpenAI’s consumer hardware.
• OpenAI is allowed to develop “some” products with third parties, though any API-based products will be exclusively hosted on Microsoft Azure. Non-API products can be hosted by any cloud provider.
• Microsoft can independently pursue AGI alone or with third parties.
• If Microsoft pursues AGI using OpenAI models, those models will be subject to compute thresholds that are “significantly larger than the size of systems used to train leading models today,” prior to achieving AGI.
• OpenAI will purchase $250 billion of Azure services incrementally.
• Microsoft no longer has the right of first refusal to be OpenAI’s compute provider.
• OpenAI can provide API access to U.S. government national security customers regardless of the cloud provider.
• OpenAI is now allowed to release open weight models that meet “requisite capability criteria.” Whatever that means.

“Both companies are better positioned than ever to continue building great products that meet real-world needs, and create new opportunity for everyone and every business,” a Microsoft/OpenAI statement adds.