On Thursday, OpenAI shared that it had come to a preliminary understanding with Microsoft, its primary backer, to revise their partnership. This new arrangement would let OpenAI transform its for-profit division into a public benefit corporation (PBC).
If state authorities approve the change, OpenAI could secure more funding from investors and potentially become a publicly traded company in the future.
Bret Taylor, OpenAI's board chair, explained in a blog post that under this tentative deal with Microsoft, the nonprofit arm would remain and keep authority over the company. The nonprofit would also receive a stake in the PBC, with an estimated value exceeding $100 billion, according to Taylor. Other details of the arrangement were not made public.
“Microsoft and OpenAI have entered into a nonbinding memorandum of understanding (MOU) outlining the next steps of our collaboration,” the companies commented jointly. While MOUs do not carry legal force, they clarify the intentions and expectations of those involved.
The joint statement further noted, “We are currently working towards completing a binding agreement with finalized terms.”
This update seems to bring a close to the lengthy discussions between OpenAI and Microsoft regarding the AI company's restructuring plans. Unlike most startups, OpenAI is overseen by a nonprofit board—this unique governance enabled board members to dismiss CEO Sam Altman in 2023. Altman was soon reinstated, leading to several board resignations, but the nonprofit structure has endured.
Currently, Microsoft enjoys priority access to OpenAI's technology and serves as its chief cloud services provider. However, since Microsoft’s initial investment in 2019, ChatGPT has expanded considerably, and OpenAI has reportedly been seeking to reduce Microsoft’s influence over its cloud infrastructure as part of the ongoing talks.
Over the past year, OpenAI has entered into agreements to decrease its reliance on Microsoft. The Wall Street Journal recently reported that OpenAI signed a $300 billion contract with Oracle for cloud services over five years, starting in 2027. Additionally, OpenAI has teamed up with SoftBank of Japan for the Stargate data center initiative.
Taylor mentioned that OpenAI and Microsoft will “continue to collaborate with the attorneys general of California and Delaware” regarding the transition, suggesting that regulatory approval is still required before the deal is finalized.
Officials from the attorneys general offices in California and Delaware did not immediately reply to TechCrunch’s inquiry for comments.
Reportedly, tensions between OpenAI and Microsoft reached a peak recently amid their negotiations. The Wall Street Journal stated that Microsoft aimed to control technology developed by Windsurf, an AI coding startup that OpenAI considered acquiring earlier this year, whereas OpenAI sought to maintain its independence. Ultimately, the acquisition did not happen, Windsurf’s founders joined Google, and the rest of the team was absorbed by another startup, Cognition.
A key issue in Elon Musk’s lawsuit against OpenAI—which alleges that Sam Altman, Greg Brockman, and the company deviated from their nonprofit objectives—is OpenAI’s move to become for-profit. Musk’s legal team has attempted to obtain details about the discussions between Microsoft and OpenAI on this matter.
Earlier this year, Musk also made an unsolicited offer to acquire OpenAI for $97 billion, a proposal the board quickly turned down. Nonetheless, legal analysts observed that Musk’s bid may have increased the value of the nonprofit’s stake in OpenAI.
It is worth highlighting that, under the new agreement, the nonprofit’s share in OpenAI PBC surpasses what Musk had proposed.
Recently, nonprofit organizations such as Encode and The Midas Project have voiced concerns over OpenAI’s for-profit shift, suggesting it undermines the company’s mission to develop AGI for the common good. In response, OpenAI has issued subpoenas to some of these groups, alleging they receive funding from rivals like Musk and Meta CEO Mark Zuckerberg. Both Encode and The Midas Project deny these allegations.
