Microsoft and OpenAI locked in $40B partnership negotiations

Microsoft and OpenAI are locked in high-stakes negotiations over their partnership terms, with OpenAI seeking greater independence from Microsoft’s control over its products and technology. The outcome could determine the fate of Microsoft’s $14 billion investment and OpenAI’s ability to secure an additional $40 billion in funding before year-end, making these talks “the most important thing that’s happening right now in AI,” according to analysts.

What’s at stake: The current contract through 2030 gives Microsoft significant control over OpenAI’s operations and 20% of its revenue, but both companies want different terms for the future.

• OpenAI needs Microsoft’s permission to convert to a traditional corporate structure and wants to break free from Microsoft’s tight hold on its compute power and technology.
• Microsoft is demanding a bigger post-conversion stake than OpenAI is willing to provide and wants to remove a clause that would void its access to OpenAI’s technology if the company achieves artificial general intelligence (AGI).
• OpenAI executives have even considered accusing Microsoft of anticompetitive behavior as negotiations intensify.

The financial implications: Microsoft’s current deal structure positions it to reap massive rewards from OpenAI’s projected growth trajectory.

• If OpenAI hits its revenue projections of more than $125 billion by 2029, the partnership could generate about $99 billion for Microsoft, according to Bernstein estimates.
• OpenAI risks forfeiting $40 billion in new investment from SoftBank, a Japanese technology investment firm, and other investors if a deal isn’t reached by year-end.
• Microsoft’s AI business revenue was “above expectations” in Q3 2025, with commercial bookings up 18% thanks to OpenAI’s commitment to Azure.

Shifting power dynamics: OpenAI has grown beyond its exclusive dependence on Microsoft, creating more leverage in negotiations.

• The company has expanded partnerships, including new contracts with Google and a joint venture called Stargate with Oracle and SoftBank.
• OpenAI now has over 3 million paid enterprise customers, up from 2 million in February, and is developing products that directly compete with Microsoft’s Copilot suite.
• The companies revised their computing agreement earlier this year, giving Microsoft only “right of first refusal” when OpenAI needs more capacity.

What they’re saying: Analysts view the negotiations as a critical inflection point for both companies.

• “They’re in a game of high-stakes poker,” said Wedbush analyst Dan Ives, who noted that “OpenAI losing Microsoft would be like trying to play baseball without a shortstop, and Microsoft knows that. So, they’re leveraged.”
• D.A. Davidson analyst Gil Luria called the talks the “most important thing that’s happening right now in AI” and suggested Microsoft has incentives to reach a deal: “Microsoft wins either way. It’s only a matter of how big the win is going to be.”

Microsoft’s hedge: The tech giant has been diversifying its AI strategy to reduce dependence on OpenAI.

• Microsoft recently hired roughly 24 new employees from Google DeepMind to advance its AI assistant Copilot and has developed its own in-house AI models.
• “Two years ago, OpenAI was the heart and lungs of the Microsoft AI story, but that’s no longer the case,” Ives noted.
• Microsoft’s stock has gained more than 20% year-to-date, hitting an all-time high above $515 per share, as investors remain confident in its AI positioning regardless of the OpenAI outcome.