Microsoft takes 27 % stake in OpenAI, worth $135B
What's the story
Microsoft and OpenAI have announced a major restructuring of their long-standing artificial intelligence (AI) partnership. The new deal gives both companies more independence while continuing their collaboration. As part of the revamped agreement, Microsoft will own around 27% of the restructured OpenAI, a stake valued at some $135 billion. This comes as the ChatGPT maker transitions into a public benefit corporation structure.
Financial commitments
Microsoft no longer has first refusal rights
Along with the equity stake, OpenAI has also committed to purchasing $250 billion worth of Azure cloud services from Microsoft. However, it's worth noting that Microsoft no longer has first refusal rights as OpenAI's compute provider under this new deal. The agreement also extends Microsoft's intellectual property rights over OpenAI's models and products until 2032.
Strategic shift
New definitive agreement marks a significant milestone
The companies have described the new definitive agreement as a major milestone in their partnership. "As we enter the next phase of this partnership, we've signed a new definitive agreement that builds on our foundation, strengthens our partnership, and sets the stage for long-term success for both organizations," they said in a joint statement. The arrangement has already been approved by regulators.
Investment history
Microsoft's investment journey with OpenAI
Microsoft's investment journey with OpenAI began in 2019 when it invested $1 billion in the then-small AI research organization. The partnership was strengthened in 2021 with further funding and again in January 2023 with a reported $10 billion investment after the success of OpenAI's ChatGPT chatbot. The collaboration has transformed both companies, making OpenAI one of the world's most valuable start-ups and giving Microsoft a stronghold in the AI race.
Governance issues
Tensions and challenges in the partnership's evolution
The partnership faced a major challenge in November 2023 when OpenAI's board suddenly fired CEO Sam Altman. He was reinstated days later after an employee revolt and pressure from Microsoft. The incident highlighted tensions over OpenAI's governance and direction as it balanced its nonprofit origins with commercial ambitions. The new deal with Microsoft is part of OpenAI's revamp of its company structure to prevent further instability and attract new investors.
Structural changes
A new era for OpenAI's product development and partnerships
The new arrangement gives OpenAI more flexibility in its future, including the ability to develop products with third parties and serve some of its products on competing cloud platforms. "We really think we can now take this technology, this sort of framework we built, and get the whole world to build amazing new companies and services and applications on top of it," said OpenAI CEO Sam Altman. Altman is not getting a stake in the newly restructured company.