Microsoft and OpenAI have signed a non-binding memorandum of understanding to establish the “next phase” of their partnership, marking a significant shift in their collaboration structure. The deal reportedly modifies key provisions around technology access and revenue sharing, while paving the way for OpenAI’s long-anticipated transformation from a nonprofit into a public benefit corporation.
What you should know: The new agreement addresses how the companies will share technology and revenue from those technologies, though specific terms remain under negotiation.
- The deal modifies the original clause preventing Microsoft from accessing OpenAI’s most advanced technology if the board determines it has achieved artificial general intelligence (AGI).
- OpenAI is providing an equity stake worth at least $100 billion to its nonprofit arm, which will continue overseeing the organization.
- Microsoft has invested over $13 billion in OpenAI and currently holds rights to 49 percent of its future profits.
Why this matters: The restructuring enables OpenAI to transition into a public benefit corporation and pursue an eventual IPO, fundamentally changing how one of the world’s most valuable AI companies operates.
- This corporate structure allows companies to pursue profit while maintaining a mission to create positive societal impact.
- The change addresses OpenAI’s need to “raise the necessary capital with conventional terms like others in this space,” as the company stated when announcing its restructuring plans.
The backstory: OpenAI’s journey toward corporate restructuring has been marked by strategic reversals and evolving priorities.
- Reports about moving away from its complicated nonprofit structure emerged last year, with the company officially announcing transformation plans after Christmas 2024.
- However, in May, OpenAI reversed course, stating it would no longer remove control of its for-profit arm from its nonprofit board.
- The company emphasized that it “was founded as a nonprofit, and is today overseen and controlled by that nonprofit. Going forward, it will continue to be overseen and controlled by that nonprofit.”
Key details: The memorandum represents a critical step in resolving the complex relationship between OpenAI’s nonprofit mission and commercial ambitions.
- OpenAI needed to reach an acceptable agreement with Microsoft first, particularly regarding Microsoft’s equity stake in the AI firm’s for-profit operations.
- The new structure maintains nonprofit oversight while creating pathways for traditional corporate fundraising and public market access.
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