OpenAI Completes Historic Restructuring, Creating $500 Billion Public Benefit Corporation

OpenAI completes its for-profit recapitalization | TechCrunch

OpenAI on Tuesday said it had completed its recapitalization, splitting the AI lab into a for-profit corporation nested inside a non-profit foundation. It's the end result of a complex legal process that had been strenuously resisted by its estranged co-founder, Elon Musk. Under the new structure, the non-profit OpenAI Foundation will have legal control over a public benefit corporation called OpenAI Group, which is free to raise funding or acquire companies without legal restraint. The Foundation will hold a significant stake in OpenAI Group, and will appoint its board of directors. "We believe that the world's most powerful technology must be developed in a way that reflects the world's collective interests," OpenAI chairman Brett Taylor wrote in a blog post. "The close of our recapitalization gives us the ability to keep pushing the frontier of AI, and an updated corporate structure to ensure progress serves everyone." Under the new structure, the OpenAI Foundation will own 26% of the for-profit, with a warrant for additional shares to be granted if the company continues to grow. Microsoft, an early investor in OpenAI, will hold a roughly 27% stake, valued at about $135 billion, with the remaining 47% held by investors and employees. According to a separate blog post by Microsoft, the deal will also extend Microsoft's IP rights to OpenAI models through 2032. If OpenAI ever declares that it has achieved its long-held goal of artificial general intelligence, the deal will also require it to submit to an independent expert panel for verification. Prior to this recapitalization, OpenAI was operating as a non-profit under strict equity restrictions -- a position that became increasingly untenable as the company's fundraising became more ambitious. In April, Softbank announced an unprecedented $30 billion investment into OpenAI, contingent on the company's successful conversion into a for-profit. On Saturday, The Information reported that the final installment of the funding had been sent, signaling a possible breakthrough in the restructuring. There have been a number of legal efforts to block or otherwise influence the restructuring, most notably from Elon Musk, who at one point offered to acquire the company for $97.4 billion. State attorneys general from California and Delaware also made inquiries into the process, and Taylor cited them specifically as a positive influence on the discussions. "We made several changes as a result of those discussions and we believe OpenAI -- and as a result, the public we serve -- are better for them," Taylor wrote. In the wake of the news, CEO Sam Altman announced an open livestream with chief scientist Jakub Pachocki to answer questions from the public. The event will begin at 10:30 a.m. Pacific Time.

OpenAI and Microsoft finally have a new deal - and it's all about AGI

OpenAI finalized its restructuring, prioritizing AI.Its nonprofit arm is now called the OpenAI Foundation. The Foundation committed $25 billion to philanthropy. OpenAI began as a nonprofit startup, but when rumors surfaced that it would switch to a for-profit company, the company received a lot of criticism. The result was a plan to split the company into two arms: a nonprofit and a for-profit arm, which was finalized today. Also: Grammarly changes its name to Superhuman - and its mission to AI wrangler The company announced the completion of its recapitalization via a blog post and accompanying livestream on Tuesday. The nonprofit, now known as the OpenAI Foundation, will retain control of the for-profit entity, holding equity valued at approximately $130 billion or 26% of the public benefit corporation (PBC) known as OpenAI Group. With those resources, OpenAI emphasizes wanting to pursue philanthropic goals. "The more OpenAI succeeds as a company, the more the nonprofit's equity stake will be worth, which the nonprofit will use to fund its philanthropic work," said Bret Taylor, Chair of the OpenAI Board of Directors, in the blog. Following this announcement, the company held a livestream, in which OpenAI CEO Sam Altman and Chief Scientist Jakub Pachocki discussed the future roadmap of the company and added more color on the acquisition. These philanthropic commitments include $25 billion allocated to two areas: curing diseases and technical solutions for AI resilience, which the company refers to as its efforts to maximize the benefits of AI while minimizing its risks. Meanwhile, long-term partner Microsoft has increased its investment in the company, holding a stake in the OpenAI Group PBC valued at approximately $135 billion, which is equivalent to 27% of the company on an as-converted diluted basis. The key tenets of the partnership agreement remain unchanged, with OpenAI continuing as Microsoft's frontier model partner, and Microsoft retaining IP rights and Azure API exclusivity until OpenAI creates AGI, or human-level intelligence. Also: Forget AGI - Meta is going after 'superintelligence' now The companies added new provisions to the partnership. Some of the highlights are that OpenAI's declaration of AGI will have to be verified by an independent expert panel; Microsoft's IP rights to the models and products will be extended through 2032 and include models post-AGl; OpenAI can develop products with third parties (Microsoft can also pursue AGI alone and with third parties); and Microsoft's IP excludes consumer hardware. While the livestream did touch upon the restructuring, it mainly focused on highlighting that even though the business arm operates as a for-profit, it will maintain the company's mission, including building AI solutions to difficult problems. Altman and Pachocki placed a larger focus on the future direction of the company. Altman kicked off the livestream by highlighting the company's future mission: to ensure that artificial intelligence benefits all of humanity. With that, both Alman and Pachocki spent some time discussing goals for the company that could enable it to achieve its objectives, which included "superintelligence" and "automating scientific discovery." Also: What is Enterprise General Intelligence? How the next stage of AI affects you OpenAI mentioned that automating research is a key tenet of scientific discovery; Pachocki said AI could currently handle about 5-hour tasks. The diagram shown during the livestream indicated a point at which AI would be able to automate 5 years' worth of research. Although it may seem like that capability is far away, another timeline estimated that an Automated AI with capabilities equivalent to a research intern level will arrive by September 2026, and that Automated AI research will arrive by March 2028. These ambitious estimates for the near-future capabilities of AI were perhaps the most notable aspect of the event. Another estimate suggested that AI could begin making small scientific discoveries by 2026 and medium discoveries by 2028, with Altman adding, "Who knows what 2030 and 2032 are going to look like?" Want more stories about AI? Sign up for AI Leaderboard, our weekly newsletter. Of course, with these ambitious goals come risks and concerns -- anticipating these, Pachocki addressed safety and alignment goals, which include value alignment, goal alignment, reliability, adversarial robustness, and systemic safety. Altman also discussed the company's foundational platform principles, which include user freedom and privacy. They also discussed OpenAI's increased need for energy and data centers as a result of these goals.

Microsoft, OpenAI Sign New AI Deal, Paving Way for More Investments

Don't miss out on our latest stories. Add PCMag as a preferred source on Google. After months of back-and-forth negotiations, Microsoft and OpenAI have signed a new deal that gives Microsoft deep insight into OpenAI's models. Redmond will retain a stake in OpenAI, while OpenAI will invest in the Azure cloud platform. In turn, Microsoft will support OpenAI's restructuring as a for-profit company and give up access to any AI if it achieves general intelligence (AGI). For almost six months, Microsoft and OpenAI have been working to fine-tune their relationship moving forward. After investing approximately $13 billion in OpenAI during its early years, Microsoft held a profit-sharing agreement, but that needed to be renegotiated amid OpenAI's plans to build hundreds of billions of dollars' worth of AI data centers. The two companies were particularly stuck on what to do if and when OpenAI developed a general intelligence AI equivalent to that of a human, otherwise known as AGI. Under the deal, Microsoft and OpenAI can develop AGI independently, but if and when that happens, their working partnership will effectively cease. Microsoft will have some rights over post-AGI models, but the AGI itself will remain separate. Microsoft will also allow OpenAI to develop AI devices with third parties, but if it uses the OpenAI API, it has to be run on Microsoft's Azure platform. Microsoft also secured an ongoing 20% share of OpenAI's revenue, and a 27% stake in the company worth around $130 billion. OpenAI will also purchase $250 billion worth of Azure compute capacity in the coming years. That is an enormous win for Microsoft, as it will continue to benefit from OpenAI's developments and research efforts, while also securing a substantial amount of equity and future revenue. OpenAI doesn't appear to get as much from the deal, but it is now untethered from Microsoft and can work with other cloud providers and companies, opening it up to new revenue streams. OpenAI CEO Sam Altman used this opportunity to promise even more from OpenAI in the future, claiming OpenAI would one day deploy a gigawatt of AI compute power per week. Considering one gigawatt can cost upward of $40 billion to deploy, it's unclear how OpenAI would fund such a move. Even with its impending $500 billion IPO sometime next year, its new browser, and the recent PayPal deal that will bring commerce inside ChatGPT. Disclosure: Ziff Davis, PCMag's parent company, filed a lawsuit against OpenAI in April 2025, alleging it infringed Ziff Davis copyrights in training and operating its AI systems.

OpenAI and Microsoft sign agreement to restructure OpenAI into a public benefit corporation with Microsoft retaining 27% stake -- non-profit 'Open AI Foundation' to oversee 'Open AI PBC'

OpenAI has been at the forefront of the rapidly expanding artificial intelligence industry for years, with ChatGPT largely responsible for ushering in this new era of technology. Microsoft was an early believer in the company, investing $1 billion back in 2019 in exchange for becoming OpenAI's exclusive cloud partner and gaining the right to commercialize its models through Azure. Today, that agreement is changing -- marking what could be a seismic shift in the AI landscape. OpenAI and Microsoft have reached a deal to restructure OpenAI from the inside, transforming its for-profit arm into a new public benefit corporation called OpenAI Group PBC. The new company will still be overseen by OpenAI's original nonprofit parent (renamed the OpenAI Foundation) with the goal of simplifying governance, streamlining equity, and catalyzing AGI progress. OpenAI will now be able to move with far more agility, retaining freedom, while still protecting its mission statement. For those unaware, OpenAI was founded in 2015 as a nonprofit dedicated to developing AI for the benefit of humanity. But the founders soon realized that the resources (and compute) required to scale up was far beyond what a nonprofit model could sustain. To attract outside investment, OpenAI created a capped-profit subsidiary in 2019 called OpenAI LP, which allowed stakeholders to earn a capped return on their investment until a certain degree -- after which profits reverted to the nonprofit's original mission. This hybrid model, as you can expect, was too complicated since the nonprofit controlled the for-profit, yet depended on it for funding. Over time, Microsoft's 2019 deal, which made it OpenAI's exclusive cloud and commercialization partner, became too restrictive for the company's long-term ambitions. That's why a new understanding was needed, which has finally been reached. In their joint statement, both companies confirmed that Microsoft supports the restructuring and outlined how their partnership will evolve and how it stands right now. Microsoft will retain its stake in the new for-profit OpenAI PBC, valued at around $135 billion -- translating to roughly a 27% share. That means the Redmont giant has earned a nearly 10x return on the $13.8 billion it has invested to date. Azure will remain OpenAI's primary cloud platform, with OpenAI committing to spend $250 billion purchasing Azure services. However, Microsoft will no longer hold the exclusive first right of refusal on future compute deals, meaning OpenAI can now pursue partnerships with other providers. OpenAI PBC itself now has a valuation of $500 billion, and it's free to bring in more investors to raise capital, like the $300 billion it needs to turn up for Oracle's compute. Perhaps the most interesting element of the deal involves AGI, or Artificial General Intelligence, which is the theoretical point where machines can match or exceed human-level intelligence. Under the new terms, Microsoft will continue to have exclusive access to OpenAI's models and products through 2032, unless AGI is formally declared before then. An independent panel of experts will verify if AGI has actually been achieved, at which point the deal will be revisited. Microsoft's research IP rights also extend until 2030 or until AGI is verified, whichever comes first, meaning any internal or confidential methods OpenAI uses to develop its products (R&D) can be accessed by Microsoft only within that timeframe. In the meantime, Microsoft is open to pursuing AGI itself through other partners. OpenAI's recapitalization has been in the works for months, amid speculation that the company could eventually go public, but it has never been a priority for the board, according to Investing.com. Just last month, we did a deep dive exploring the intricacies of Microsoft and OpenAI's partnership when they first announced a MoU had been reached -- now, with a fresh OpenAI PBC in the play, we can only wait to see how quickly the company moves forward.

Delaware top lawyer warns of legal action if OpenAI fails to act in public interest

One of the top US officials overseeing OpenAI's restructuring has warned she will take legal action against the ChatGPT maker if it fails to stick to public interest pledges Sam Altman agreed in negotiations to unlock the deal. Kathy Jennings, the attorney-general of Delaware, told the Financial Times she consented to the deal after securing multiple binding legal commitments from Altman, OpenAI's chief executive. They require the $500bn start-up to prioritise AI safety over its shareholders' commercial gain. The final agreement, announced on Tuesday, puts key decisions, including launching a public listing, in the hands of the non-profit OpenAI Foundation, which has a 26 per cent stake in the for-profit arm, called the OpenAI Group, worth $130bn. "Anyone who is familiar with our work knows we are not shy to go into the courtroom to benefit the public if we need to," said Jennings, who has previously taken legal action challenging Elon Musk's so-called Department of Government Efficiency. The complex restructure was finalised late on Monday night, after direct talks between Altman, Jennings and her California counterpart, Rob Bonta, according to multiple people with direct knowledge of the process. OpenAI's chief financial officer, Sarah Friar, worked in parallel to negotiate financial terms directly with Amy Hood, her counterpart at Microsoft, which is OpenAI's biggest shareholder under the new structure, they added. The deal, after more than a year of negotiations, enables investors to hold equity for the first time and unlocks a future stock market offering. Altman said on Tuesday that an IPO was the most likely path for the AI group, though the company said it was too early to settle the timing or size of the raise. "An IPO is not our focus, so we could not possibly have set a date," the company said. As part of the restructuring discussions, Jennings and Bonta sought to codify language in OpenAI's charter, which lays out principles to ensure AGI -- AI which surpasses human intelligence -- benefits humanity. It also commits OpenAI to join forces with any "safety-conscious" rival that has a good chance of reaching OpenAI's goal of creating AGI within a two-year timeframe. "The charter was important to us [and was] one of the key concessions that we got," said Owen Lefkon, a senior attorney in Jennings's office, who worked on the agreement. "Up until this week, it was just a page on a website. As of today, the company has committed to two state attorneys-general that it will be used to execute the mission going forward." Jennings said Altman's agreement to place OpenAI's safety and security committee, which has the power to block the release of AI models, under the OpenAI Foundation rather than the OpenAI Group was also "a critical turning point in our discussions". "The question all along was whether OpenAI would reorient away from its charitable goals and towards profit-making. [Tuesday's] agreement has meaningful provisions which mean the mission controls the operations," said Jill Horwitz, a professor at Northwestern University and UCLA and expert in non-profit law. These commitments mean OpenAI's shareholders -- including SoftBank and venture capitalists such as Thrive Capital and Khosla Ventures -- are still exposed to unique risks from the start-up's governance. But it is unclear how some of these requirements will work in practice. Microsoft chief executive Satya Nadella on Tuesday questioned the definition of AGI, calling it a "nonsensical word". Microsoft, which has invested $13.75bn into OpenAI, agreed new terms with the start-up after Hood and Friar "took the deal offline and away from the lawyers" to iron out the final details last week, according to a person with knowledge of the matter. The companies signed a draft agreement on September 11, and set a 45-day countdown to finalise terms by this week. The last piece to fall into place was a pledge from OpenAI to spend $250bn with the technology giant's cloud arm over time. "That was the final sticking point to be resolved and it got finalised over the weekend between Sarah and Amy," said one person with knowledge of the talks. The pair both worked at Goldman Sachs in the early 2000s and have known each other for decades. Microsoft, which will take a 27 per cent stake worth $135bn in the OpenAI Group, extracted another important concession: the group and its AI chief Mustafa Suleyman are now free to pursue AGI on its own and with third parties, having been prevented from doing so under the previous contract. OpenAI, meanwhile, insisted on being able to ringfence significant pieces of "AGI-level" research from Microsoft, provided those were not commercialised, according to a person familiar with the discussions.

OpenAI says it has new for-profit business structure, adjusts partnership with Microsoft

SAN FRANCISCO (AP) -- OpenAI said Tuesday it has reorganized its ownership structure and converted its business into a public benefit corporation, paving the way for the ChatGPT maker to more easily profit off its artificial intelligence technology even as it remains technically under the control of a nonprofit. The company also said it has signed a new agreement with its longtime backer Microsoft that gives the software giant a roughly 27% stake in OpenAI's new for-profit corporation but changes some of the details of their close partnership. For more than a year, OpenAI's proposed changes to its corporate structure have drawn the scrutiny of regulators, competitors and advocates concerned about the societal impacts of AI. The attorneys general of Delaware, where OpenAI is incorporated, and California, where it is headquartered, had both said they're investigating the proposed changes. Neither office immediately responded to a request for comment Tuesday. OpenAI said it completed its restructuring "after nearly a year of engaging in constructive dialogue" with the offices in both states. "OpenAI has completed its recapitalization, simplifying its corporate structure," said a blog post Tuesday from Bret Taylor, the chair of OpenAI's board of directors. "The nonprofit remains in control of the for-profit, and now has a direct path to major resources before AGI arrives." AGI stands for artificial general intelligence, which OpenAI defines as "highly autonomous systems that outperform humans at most economically valuable work." OpenAI was founded as a nonprofit in 2015 with a mission to safely build AGI for humanity's benefit. OpenAI had previously said its own board will decide when AGI is reached, effectively ending its Microsoft partnership. But it now says that "once AGI is declared by OpenAI, that declaration will now be verified by an independent expert panel," and that Microsoft's rights to OpenAI's confidential research methods "will remain until either the expert panel verifies AGI or through 2030, whichever is first." Microsoft will also retain some commercial rights to OpenAI products "post-AGI." Microsoft put out the same announcement about the revised partnership Tuesday but declined further comment. Going forward, the nonprofit will be called the OpenAI Foundation and Taylor said it would grant out $25 billion toward health and curing diseases and protecting against the cybersecurity risks of AI. He did not say over what time period those funds would be dispersed. Robert Weissman, co-president of the nonprofit Public Citizen, said this arrangement does not guarantee the nonprofit independence, likening it to a corporate foundation that will serve the interests of the for profit. Even as the nonprofit's board may technically remain in control, Weissman said that control "is illusory because there is no evidence of the nonprofit ever imposing its values on the for profit."

OpenAI completes shift to becoming for-profit entity

OpenAI has completed its long-planned conversion to a for-profit entity, a move that could allow it to raise billions of dollars in investment and potentially clear the way for a stock market debut As part of the arrangement, OpenAI and Microsoft announced changes to their longstanding partnership that leave the tech giant with a 27% stake in the ChatGPT-maker. The deal changes the nature of the relationship between the two companies, which first partnered in 2019, when OpenAI was a non-profit artificial intelligence (AI) research organization. Under the terms, Microsoft can now independently pursue artificial general intelligence - sometimes defined as AI that surpasses human intelligence - on its own or in partnership with other parties, the companies said.

Microsoft now owns 27% of OpenAI as the company shifts to a for-profit model

Serving tech enthusiasts for over 25 years. TechSpot means tech analysis and advice you can trust. The big picture: OpenAI has completed a sweeping overhaul of its ownership and governance structure, ending months of negotiations with Microsoft and securing a path to operate as a for-profit public benefit corporation while remaining under nonprofit oversight. The deal gives the Redmond firm a 27% stake valued at roughly $135 billion and establishes the financial terms of one of the most closely watched partnerships in the technology industry. The new arrangement solidifies OpenAI's position as a profit-seeking enterprise, ending nearly a year of restructuring discussions that had drawn scrutiny from regulators and investors. Under the terms, Microsoft's access to OpenAI's technology, including any systems capable of achieving artificial general intelligence (AGI), extends through 2032. The software company will continue to receive 20% of OpenAI's revenue until an independent panel certifies that AGI has been achieved. That milestone, which remains hypothetical, marks one of the few conditions capable of altering Microsoft's stake in future profits. Bret Taylor, OpenAI's chairman, said the agreement brings clarity to a complex hybrid structure that has at times strained investor confidence. "The nonprofit remains in control of the for-profit, and now has a direct path to major resources before AGI arrives," he said in a statement. The reshaping of OpenAI's corporate model had been under review by the state attorneys general of Delaware and California. Both offices said this week they would not oppose the company's conversion to a for-profit structure, provided it commits to reinforcing nonprofit oversight and ethical safeguards. The restructured entity, known as OpenAI Group Public Benefit Corporation, will continue to be governed by a nonprofit organization now renamed the OpenAI Foundation. The foundation will hold a 26% equity stake - estimated at around $130 billion at OpenAI's current $500 billion valuation - and retains a warrant to acquire additional shares if the company's value expands tenfold within fifteen years. OpenAI said the foundation intends to use a portion of its equity for initiatives in public-interest technology, including programs that accelerate medical research and mitigate emerging AI risks, such as workforce disruption and biosecurity threats. "Our hope is for the OpenAI Foundation to be the biggest nonprofit ever," Chief Executive Sam Altman said during a livestreamed event announcing the deal. Altman will not receive personal equity in the new structure, according to the company. OpenAI chairman Bret Taylor Microsoft's role in OpenAI has been central to the partnership's evolution. Since its initial $13.75 billion investment, Microsoft has relied on OpenAI's models to power its Copilot suite of generative AI tools across its Office, Windows, and Azure products. Under the revised agreement, Microsoft retains intellectual property rights for any AI products or models developed through 2032. This continuity, analysts said, removes a significant source of investor uncertainty. Anurag Rana of Bloomberg Intelligence described the extension of IP rights as "the most important aspect" of the renegotiated deal. The new terms end Microsoft's exclusive right to host OpenAI's systems on its Azure cloud. OpenAI will be able to consider other providers, including Oracle, for additional cloud infrastructure while pledging another $250 billion in long-term commitments to Azure. At the center of the lengthy talks was a dispute over how to define the arrival of artificial general intelligence. The new contract defers that determination to an external expert panel. Once AGI is verified, Microsoft's entitlement to OpenAI's revenue share will end, though its ownership stake will remain. OpenAI's chief scientist, Jakub Pachocki, said during Tuesday's program that he believes AI systems capable of superintelligence could emerge within the next decade, with the company targeting autonomous research systems by 2028. With regulators satisfied, Microsoft's stake finalized, and governance rules clarified, OpenAI's hybrid model - half nonprofit mission, half commercial engine - is now positioned to test how far artificial intelligence can scale under public benefit oversight.

Microsoft gets 27% stake in OpenAI, and a $250B Azure commitment

Microsoft and OpenAI announced the long-awaited details of their new partnership agreement Tuesday morning -- with concessions on both sides that keep the companies aligned but not in lockstep as they move into their next phases of AI development. Under the arrangement, Microsoft gets a 27% equity stake in OpenAI's new for-profit entity, the OpenAI Group PBC (Public Benefit Corporation), a stake valued at approximately $135 billion. That's a decrease from 32.5% equity but not a bad return on an investment of $13.8 billion. At the same time, OpenAI has contracted to purchase an incremental $250 billion in Microsoft Azure cloud services. However, in a significant concession in return for that certainty, Microsoft will no longer have a "right of first refusal" on new OpenAI cloud workloads. Microsoft, meanwhile, will retain its intellectual property rights to OpenAI models and products through 2032, an extension of the timeframe that existed previously. A key provision of the new agreement centers on Artificial General Intelligence (AGI), with any declaration of AGI by OpenAI now subject to verification by an independent expert panel. This was a sticking point in the earlier partnership agreement, with an ambiguous definition of AI potentially triggering new provisions of the prior arrangement. Microsoft and OpenAI had previously announced a tentative agreement without providing details. More aspects of the deal are disclosed in a joint blog post from the companies. Shares of Microsoft are up 2% in early trading after the announcement. The company reports earnings Wednesday afternoon, and some analysts have said the uncertainty over the OpenAI arrangement has been impacting Microsoft's stock.

OpenAI Ditches the 'Non' in 'Non-Profit'

OpenAI's "will they, won't they" flirtation with becoming a for-profit corporation is over. On Tuesday, the company announced that it has completed its recapitalization process, turning its AI lab into a for-profit corporation despite the objections of the company's co-founder, Elon Musk. "We believe that the world’s most powerful technology must be developed in a way that reflects the world’s collective interests," OpenAI chairman Brett Taylor wrote of the change. "The close of our recapitalization gives us the ability to keep pushing the frontier of AI, and an updated corporate structure to ensure progress serves everyone." Under the new structure, there are now two separate entities: the OpenAI Foundation, which is a non-profit organization with partial control over OpenAI Group, a newly formed public benefit corporation. Under the new structure, OpenAI Group will be able to do things that a for-profit entity can (and a non-profit can't), like raise more money and acquire companies. It will also get its own board of directors, which the Foundation will appoint. OpenAI Foundation will own 26% of the now for-profit OpenAI Group, valued at around $130 billion, and will continue to be granted shares of the company as it grows. Microsoft will hold a 27% stake in the for-profit arm, which is currently valued at about $135 billion. Microsoft also announced that, as a part of this shift, it will continue to hold intellectual property rights to OpenAI models and future products through 2032. The remaining 47% of the company's stock will be held by other investors and the employees of OpenAI Group. In announcing the for-profit move, Altman said in a livestream that his hope is for the OpenAI Foundation to be one of the "biggest non-profits ever." The expectation is for the Foundation to use its equity stake in the OpenAI Group to help fund philanthropic work. That will start with a $25 billion commitment to "health and curing diseases" and "AI resiliance" to counteract some of the risks presented by the deployment of AI. Altman also seemed to shift the goal posts on achieving artificial general intelligence, taking a posture that OpenAI aims to develop a "personal AGI" that will be available to people via tools that they will then use to create new things. As part of a frankly pretty messy Q&A session at the end of the stream, Altman and OpenAI Chief Scientist Jakub Pachocki answered questions from viewers. That included a question on when AGI will be achieved. Pachocki said, "In some number of years, we will look back at these years and say this was the transition period when AGI happened," but did not provide a definitive answer. Altman declined to provide an answer related to AGI, instead pivoting to a goal of creating an "AI researcher" capable of performing autonomous research by 2028. Notably, Microsoft announced that as part of the new arrangement with OpenAI, if the company declares that it has achieved artificial general intelligence, it will have to have that verified by an independent expert panel. Throughout the Q&A, Altman was peppered with questions that clearly had an air of frustration. When asked why OpenAI has copied TikTok's model with Sora and may introduce ads to ChatGPT despite warning about tech becoming addictive and eroding trust, Altman admitted that he's still worried about these problems but said, "You'll have to judge us on our actions," without providing anything resembling a real answer. The majority of the most upvoted questions from audience members in the Q&A were from users frustrated by the guardrails that prevent them from having "adult" conversations with ChatGPT, which resulted in Altman repeatedly apologizing for the rollout of its latest model and safety features. At times, Pachocki and Altman appeared to be trying to pass difficult questions to each other to handle rather than committing to an answer themselves. The move to a for-profit structure has been a point of contention around OpenAI for years now. Despite initially being founded as a non-profit, OpenAI launched a for-profit subsidiary in 2019, and in 2024, it announced a plan to restructure to form a public benefit corporation that would shift ownership of OpenAI’s models to the for-profit arm. That received a significant amount of pushback, including from co-founder Elon Musk, who sued to prevent the restructuring from taking place. While the legal challenges temporarily prevented OpenAI from making the change, the company decided to go forward with the recapitalization anyway. Time will tell if it sticks. While Musk will likely continue to object to the change, another opponent of OpenAI's for-profit shift appears to be standing down. According to TIME, California Attorney General Rob Bonta won't sue to prevent OpenAI from forming its corporate arm. "We secured concessions that ensure charitable assets are used for their intended purpose, safety will be prioritized, as well as a commitment that OpenAI will remain right here in California. With these important concessions in place, we will not be in court opposing OpenAI’s recapitalization plan,†Bonta told TIME in an email.

OpenAI reach $500B valuation as Microsoft renews AI alliance

The deal allows OpenAI to reorganize itself into a public benefit corporation (PBC),a hybrid model designed to balance profit with public interest. It also removes the restrictions that had limited OpenAI's ability to raise capital independently since the two companies first joined forces in 2019. The restructured partnership gives OpenAI more operational freedom while securing Microsoft's position as a core AI partner. Microsoft now holds a 27 percent stake worth $135 billion in OpenAI Group PBC, which will remain under the control of the nonprofit OpenAI Foundation. The tech giant has invested $13.8 billion in OpenAI so far, earning a nearly tenfold return. CEO Sam Altman will not receive equity in the restructured company, an OpenAI spokesperson said, ending speculation from last year that he would. The company also has no immediate plans for a public offering. The deal cements one of the most valuable collaborations in the tech world and sets new terms for how Microsoft and OpenAI will share intellectual property and responsibilities as they advance toward artificial general intelligence (AGI), the stage when AI systems can match a well-educated human adult.

Microsoft and OpenAI announce new deal and Microsoft gets 27% -- what it means for you

Microsoft and OpenAI have a long-standing relationship. Since 2019, the two companies have worked together to expand their positions in the world of AI. And now, they are coming together to announce some big changes in their partnership, most notably with Microsoft increasing its share in the OpenAI company. "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," the company stated in a blog post. The big news here is that OpenAI is giving Microsoft a whopping 27% ownership stake in the company, as part of a restructuring plan that has been a year in the making. This new system means Microsoft will now have a stake in OpenAI with an approximate value of $135 billion. Microsoft will also have access to the company's technology until 2032, including models that achieved AGI benchmarks -- a more powerful type of AI that companies are aiming for. For OpenAI, it will remain Microsoft's frontier model partner. While it wasn't listed in the announcement post from Microsoft and OpenAI, Bloomberg reports that an insider on the matter has stated Microsoft will continue to be entitled to receive 20% of OpenAI's revenue. This change in the system of OpenAI has been planned for a while now. When OpenAI first launched, it did so as a non-profit research lab, focused on developing AI that benefits humanity. Obviously, since then, the company has blown up, seeing a huge rise in popularity and interest. In 2019, it created a capped-profit subsidiary, allowing huge investments that could allow it to build and train models like ChatGPT, which require a lot of funding. When it did this, it created a new structure, allowing it to remain a non-profit while getting investments from companies like Microsoft. Now, with the recently announced deal with Microsoft, OpenAI becomes a public benefit corporation, essentially becoming a for-profit entity. In other words, while OpenAI used to be a company that focused entirely on enhancing the world of AI, with all money going back into the business, the restructuring allows the company to become more profitable, rewarding shareholders for their investments and removing any profit ceilings. This is big news for both OpenAI and Microsoft. For OpenAI, it allows for more money to flow in and out, offering larger amounts of investment into big new projects like proposed data centres and new AI models. For Microsoft, it means its investments in OpenAI are no longer capped, effectively meaning unlimited profits, only matched by OpenAI's growth. We recently covered how Anthropic had worked out a clear path for profitability in the world of AI, focusing on its corporate relationships. It seems OpenAI is now also going down a similar road.

What to know about Microsoft and OpenAI's extended partnership

Why it matters: The restructuring gives both companies more flexibility, but also lets them compete more effectively against each other. The big picture: After a reorganization, Microsoft holds a $135 billion stake in OpenAI, but the two companies' paths are likely to diverge in coming years. * The new deal offers the tech giants the ability to move much faster as they compete to dominate in the next phase of AI. * OpenAI has more freedom to seek hyper-growth, and Microsoft gets an opening to hedge its AI bets with a range of partners. What OpenAI gets: Most importantly for OpenAI, it was able to complete its restructuring, ensuring that recent investments from SoftBank and others proceed as scheduled. * OpenAI gets the flexibility to ink new infrastructure deals without giving Microsoft a right of first refusal. * This makes sense for both parties, given that OpenAI has already committed to $1.4 trillion in infrastructure spending and envisions eventually adding $1 trillion per year in new capacity, far exceeding the investment Microsoft would want on its balance sheet. * OpenAI also gains the rights to develop consumer hardware without worrying about Microsoft having access to whatever it is that Sam Altman and Jony Ive are cooking up. What Microsoft gets: In addition to having a more easily quantified stake in the company, Microsoft gains $250 billion in new business commitments. * Microsoft, and therefore its customers, get longer-term certainty of access to OpenAI's technology. * Under the new deal, Microsoft maintains access to key OpenAI intellectual property through 2032 and doesn't lose all of it the moment that OpenAI reaches what it calls Artificial General Intelligence (AGI), a sore point for Microsoft under the prior deal. Reality check: While OpenAI can say it thinks AGI has been reached, that determination now must be affirmed by an independent board. * Microsoft can also pursue AGI on its own, should it have the desire and capability to do so. * If it uses OpenAI's IP as part of those efforts, it's subject to certain limits. What they're saying: "By securing IP rights through 2032, Microsoft protects the foundation of its Copilot strategy and Azure OpenAI monetization," William Blair analyst Jason Ader said in a research note. "Still, Azure will now have to compete for more of OpenAI's workloads going forward." * BNP Paribas also sees the revised deal as a positive for Microsoft. * "We believe today's announcement removes a long-standing overhang as investors now have greater clarity into the future of the OpenAI/Microsoft partnership," it said in a research note. * "Moreover, the new $250 billion Azure commitment (we imagine largely for OpenAI inferencing) should assuage concerns that Microsoft is simply foregoing hundreds of billions in potential revenue for others to seize." Yes, but: Microsoft and OpenAI are the clear winners here, others less so. * Although the restructuring was given the OK by attorneys general in Delaware and California, it appears unlikely that the new nonprofit will allow the public the same power it had under the old structure. * The new nonprofit will be richly endowed -- but will have fewer guardrails for ensuring that the for-profit entity hews to its mission of safely developing superintelligence for the benefit of all humanity. * The nonprofit's primary control lever is its power to appoint (and remove) the board members of OpenAI's for-profit endeavor. The nonprofit will also maintain a safety committee chaired by a board member who is not on the for-profit entity's board. * Public Citizen was among the groups panning OpenAI's restructuring. "Today's announcement from OpenAI is an attempt to entrench the status quo, in which [the] OpenAI nonprofit serves at the beck and call of OpenAI for-profit, even though the nonprofit is supposed to exert operational control over the for-profit," Public Citizen co-president Robert Weissman said in a statement. What's next: The new pact cools tensions for now, but with Microsoft and OpenAI competing on many fronts, new flashpoints are likely.

OpenAI drops nonprofit status for $130 billion restructure

Water is wet. Grass is green. And OpenAI, the nonprofit that was going to save humanity from dangerous AI, just went for-profit. The company's restructuring, announced Tuesday, converts OpenAI into a public benefit corporation while handing its nonprofit foundation a $130 billion stake, making it the wealthiest foundation in America. But this move was not about philanthropy. It's about unleashing OpenAI to compete with rivals like Google and Meta. The writing has been on the wall since ChatGPT exploded onto the scene in 2022. While OpenAI preached about benefiting humanity from its nonprofit perch, competitors weren't bound by such lofty restrictions. Google, Meta, and Amazon could tap their trillion-dollar valuations, issue stock options to lure top talent, and make billion-dollar infrastructure bets without asking permission from attorneys general. OpenAI's nonprofit board famously fired Altman in November 2023, reportedly over concerns about the pace of commercialization. His triumphant return days later was the death knell for any pretense that OpenAI would remain a traditional nonprofit. The board that once tried to pump the brakes was replaced with one that understood the assignment: win the AI race, whatever it takes. The restructuring changes everything. As a public benefit corporation -- a for-profit company legally required to balance shareholder returns with a stated public benefit -- OpenAI can now issue equity to employees, critical for competing with Meta's million-dollar packages. Unlike a traditional nonprofit, which can't offer stock options, or its previous convoluted "capped-profit" structure, which turned off investors, a PBC operates like a normal company with a social mission baked into its charter. Think of it as the corporate equivalent of having your cake and eating it too. OpenAI can raise capital through traditional equity rounds, offer competitive compensation packages, and eventually go public, all while claiming to serve humanity's interests. Anthropic uses a similar structure. Until recently, xAI, owned by Elon Musk, did too. The timing isn't coincidental. SoftBank had threatened to slash its $30 billion investment to $20 billion if OpenAI didn't restructure by year's end. Microsoft needed to renegotiate its exclusive access to OpenAI's technology. Top researchers were fleeing to competitors who could offer real equity upside. The nonprofit status was keeping them from raising money, which the company needs an almost endless amount of to survive. Consider the math. OpenAI has racked up around $1 trillion in AI deals this year alone, according to The Financial Times. This includes $300 billion with Oracle, $100 billion with Nvidia, and $22 billion with CoreWeave, a data center company. Those deals together are nearly 80 times its current annual revenue of $13 billion. The company plans to build 250 gigawatts of computing capacity by 2033, enough to power Germany. These aren't the modest ambitions of a charity; they're the imperial dreams of a company that believes it will either dominate the future or cease to exist. Critics like Musk, who's suing to block the restructuring, argue this betrays OpenAI's founding mission. But that mission was always a contradiction. How do you benefit all humanity while racing against competitors who answer only to shareholders? OpenAI defends itself by pointing to the nonprofit's $130 billion stake and its promise to spend $25 billion on health and AI safety initiatives. But this is window dressing on a fundamentally commercial enterprise. The nonprofit board may technically maintain control, but when your survival depends on keeping investors happy, raising hundreds of billions in capital, and retaining talent with competitive equity packages, that control becomes largely ceremonial. What's remarkable isn't that OpenAI abandoned its nonprofit structure, but that anyone believed it would last. In Silicon Valley, where network effects and winner-take-all dynamics reign supreme, coming in second place in the AGI race might as well be last place.

OpenAI completes for-profit restructuring and grants Microsoft a 27% stake in the company | Fortune

OpenAI and Microsoft have jointly announced that they've reached a deal to complete OpenAI's restructure into a more traditional for-profit corporation. As part of the deal, early investor Microsoft will get a 27% stake in OpenAI, worth around $135 billion. The tech giant will also retain access to OpenAI's technology through 2032, including any models that reach the milestone of artificial general intelligence (AGI) -- something that will now be verified by an independent expert panel. The company's stock rose on the news, with shares up about 2% on Tuesday, pushing its market valuation past the $4 trillion mark again. Microsoft will also retain rights to OpenAI's research IP, defined as "confidential methods used in the development of models and systems," until either AGI is verified or 2030, whichever comes first. However, Microsoft's IP rights no longer include OpenAI's consumer hardware. The company also relinquished its cloud exclusivity with OpenAI, a concession on its part, but announced OpenAI has contracted to purchase an incremental $250 billion of Azure services. Under the deal, OpenAI has completed its corporate recapitalization and converted its for-profit arm into the OpenAI Group Public Benefit Corporation, which remains controlled by the non-profit foundation. The AI lab has also cleared a critical regulatory hurdle, with the Attorney General of Delaware announcing that her office has issued a "Statement of No Objection" to the proposed corporate recapitalization. In a statement, OpenAI chair Bret Taylor said the recapitalization was completed after nearly a year of "engaging in constructive dialogue with the offices of the Attorneys General of California and Delaware," and that the company "made several changes as a result of those discussions." The restructuring plan has taken nearly a year to negotiate and has reportedly been a source of tension between the two companies. The new agreement lifts a key restriction on OpenAI's ability to raise capital, a limitation dating back to its 2019 partnership with Microsoft, which granted the tech giant extensive rights over OpenAI's work in exchange for the costly cloud computing power needed to support it. "The OpenAI mission -- ensuring that AGI benefits all of humanity -- will be advanced through both the business and the Foundation," Taylor said in a blog post announcing the deal. "The more OpenAI succeeds as a company, the more the non-profit's equity stake will be worth, which the non-profit will use to fund its philanthropic work."

OpenAI Successfully Sheds Its Roots as an Ethical Non-Profit

It's official: OpenAI is now a bona fide for-profit corporation. On Tuesday, the ChatGPT maker announced that it had restructured its for-profit arm into a public benefit corporation, a type of corporate entity whose ostensible mission is to serve the public good while -- crucially -- generating loads of profit. The move completes the company's metamorphosis: from its origins as a nonprofit devoted to developing open source AI technology for the betterment of humankind to the closed-source, profit-seeking juggernaut that it is today, with its staggering half-trillion dollar valuation reflecting the ominously outsized influence it has on the global economy. The company's nonprofit arm, now called the "OpenAI Foundation," will remain in control of the for-profit arm, rebranded OpenAI Group PBC. But as part of the restructuring, the nonprofit will receive a 26 percent stake in the public benefit corporation equal to $130 billion. Down the line, this also allows OpenAI to list itself on the stock market, generating an even more immense valuation than it currently enjoys. The restructuring has been over a year and a half in the making, with OpenAI's longtime patron Microsoft -- as well as its rival Elon Musk, who helped cofound OpenAI with CEO Sam Altman before departing the company in 2018 -- majorly complicating OpenAI's conversion. Originally, OpenAI wanted to usurp its nonprofit from the throne and put its for-profit arm in charge of the entire company. It abandoned these plans in May, however, amid a lawsuit from Musk which tried to block the move, accusing the company of betraying its founding mission of pursuing AI for the benefit of humanity. Microsoft, meanwhile, had backed OpenAI with billions of dollars in crucial funding, and as a result earned exclusive rights to OpenAI's intellectual property and software, as well as an agreement to share revenue. It didn't want to lose these privileges in a restructuring without getting an even bigger stake in the company. One of the biggest points of contention was artificial general intelligence, or AGI, a hypothetical AI system that surpasses human cognition in virtually all areas. The old deal between Microsoft and OpenAI contained a vaguely worded "AGI clause" stipulating that if OpenAI achieved AGI, Microsoft would lose exclusive rights to the startup's tech. Microsoft saw this as a huge liability, while OpenAI saw it as an indispensable failsafe against its powerful benefactor. With the conversion to a public benefit corporation, these issues have been put to bed, at least for the time being. In its own announcement, Microsoft said it will keep its access to OpenAI's tech if it ever achieves AGI -- so long as it has "appropriate safety guardrails" -- and that any declaration of achieving AGI will "now be verified by an independent expert panel," as The Verge noted. The revenue sharing will continue until the expert panel confirms AGI, and in the meantime Microsoft gets to pursue building AGI on its own, and have a 27 percent stake in the new PBC, which is one percent more than OpenAI's nonprofit holds. But the biggest source of relief for OpenAI concerns its enormous investment from Softbank. The Japanese conglomerate agreed to shovel $30 billion into OpenAI, but only if it completed its restructuring by the end of year. If not, it would've withheld about $10 billion of its pledged investment, funds that OpenAI simply can't afford to squander as it tangles itself in a web of centibillion-dollar deals with money flowing in all directions -- including a just announced deal to buy $250 billion worth of Microsoft's Azure cloud computing service -- not to mention its struggle to actually turn a profit. Technically, the nonprofit arm remains in control of the company, but it's extremely doubtful that it will play anything more than a ceremonial role with the profit-making arm unleashed to raise more capital than ever. OpenAI can call itself a "public benefit" entity, but it hasn't shown much regard for the benefit of humanity with its environmentally destructive data centers or its psychologically damaging tech.

Microsoft Values $135 Billion Stake in OpenAI as Firms Face Legal Pressure - Decrypt

The update comes as Microsoft faces an antitrust suit alleging it used Azure's dominance to inflate ChatGPT prices. On Tuesday, Microsoft and OpenAI announced a restructured partnership that values the Redmond giant's stake at $135 billion, roughly 27% of OpenAI's new public-benefit company, even as both firms navigate antitrust scrutiny and a federal lawsuit alleging compute monopolization. The reworked pact supports OpenAI's conversion into OpenAI Group PBC under the nonprofit OpenAI Foundation, and positions Microsoft as the company's "frontier model partner" through 2032, according to a Tuesday statement. Board chair Bret Taylor and CEO Sam Altman can now control appointment and removal powers over the PBC's board, consolidating Altman's authority. OpenAI will continue channeling roughly 20% of revenue to Microsoft, though both parties expect that flow to end once an independent panel certifies that artificial general intelligence has been achieved. Microsoft retains exclusive IP licenses to OpenAI's models and products through 2032, including post-AGI systems, but holds no rights to any consumer hardware OpenAI produces, according to the statement. The AI giant can collaborate with third-party developers on joint products, deploy open-weight models that meet safety thresholds, serve U.S. national security agencies on any cloud infrastructure, and independently pursue its own AGI research capabilities, previously blocked by Microsoft's exclusivity provisions. API products developed with third parties will be exclusive to Azure, while non-API products may be served on any cloud provider. Microsoft and OpenAI did not immediately respond to Decrypt's request for comment. The announcement arrives amid mounting legal pressure as a class-action suit filed two weeks earlier alleges Microsoft weaponized its 2019 Azure exclusivity arrangement to throttle computational capacity for ChatGPT, artificially maintaining subscription rates at "100 to 200 times" competitors' levels during February's AI pricing conflict. "The AI we build today will shape our tomorrow. The path we are currently on, dominated by centralized AI, is fraught with peril," Jiahao Sun, CEO of FLock.io, told Decrypt. "When a few powerful entities control AI, we risk creating systems that reflect a narrow worldview, perpetuating biases, and eroding trust. OpenAI has also committed to purchasing $250 billion in additional Azure services, though Microsoft surrendered first-refusal rights as compute provider. The requirement that OpenAI source all computational resources exclusively from Microsoft had become a major friction point as ChatGPT's 800 million weekly users and research demands drove up infrastructure costs. The partnership began in July 2019 with a $1 billion investment that made Microsoft OpenAI's exclusive cloud provider, and deepened in January 2023 with a multi-billion-dollar expansion that positioned Microsoft as OpenAI's primary backer.

A nonprofit on top, billions below: How OpenAI's new structure works

OpenAI CEO Sam Altman in Abilene, Texas, in September. Kyle Grillot / Bloomberg / Getty Images OpenAI announced Tuesday morning that it had completed a tumultuous corporate restructuring effort, simplifying a complex ownership web into a controlling nonprofit entity and a reimagined for-profit subsidiary. The simplified structure will allow investors and corporate partners to more easily reap returns from their investments and pave the way to an envisioned public offering. The for-profit's board will be appointed solely by the overarching nonprofit entity and will, for now, consist entirely of the nonprofit organization's board members. In a livestream session announcing the change Tuesday, OpenAI CEO Sam Altman said the for-profit entity "will be able to attract the resources we need for [our] gigantic infrastructure buildout to serve the research and product goals that we have." Altman said OpenAI has committed to spend roughly $1.4 trillion on infrastructure so far, largely devoted to the data centers and high-performance computing chips required to train and power cutting-edge artificial intelligence systems. The umbrella nonprofit organization will be rebranded as the OpenAI Foundation, and the for-profit entity will be called the OpenAI Group. Like competitor Anthropic, the new OpenAI Group will be a for-profit public benefit corporation (PBC), a type of for-profit corporation that intends to produce public benefits and operate in a responsible and sustainable manner, balancing financial returns to shareholders with a broader public interest. A company webpage describing the company's new structure specifies that the OpenAI Group PBC will advance OpenAI's "mission and consider the broader interests of all stakeholders, ensuring the company's mission and commercial success advance together." Because OpenAI was founded as a nonprofit organization in 2015, it has faced difficulty balancing its nonprofit charitable duties and attracting needed capital. OpenAI launched a for-profit subsidiary in 2019, predicting it would require "on the order of $10 billion" to achieve its goals. However, investors' returns in the subsidiary were limited to 100 times their investments or less. OpenAI could not simply now abandon its nonprofit status, according to Luís Calderón Gómez, a professor at Cardozo School of Law at Yeshiva University in New York City. To do so, a for-profit OpenAI would have had to buy the nonprofit arm's assets "for fair market value, something that it was unlikely to be able to do," given OpenAI's reported $500 billion valuation in early October. The nonprofit OpenAI Foundation umbrella organization will receive a 26% stake in the for-profit OpenAI Group, a share that would be worth $130 billion at the early-October valuation. However, Microsoft, one of OpenAI's early backers and largest investors, will receive a 27% stake. Microsoft has invested $13.75 billion in OpenAI and had been slow to greenlight the restructuring efforts due to concerns over licensing and revenue sharing. Even though the foundation controls will control less equity in the OpenAI Group than Microsoft, the board of the nonprofit OpenAI Foundation will have "special voting and governance rights" that allow it to appoint all members of the for-profit OpenAI Group's board of directors. Currently, Microsoft and other investors do not have seats on OpenAI's boards. OpenAI employees will receive 26% equity in the OpenAI Group. As reported by The Information, a group of investors who participated in OpenAI's $40 billion fundraising round this year, including Japan's Softbank, will receive 15% equity, while other investors will receive the remaining 6%. Tuesday's announcement stipulated that the OpenAI Foundation will also have the contractual right to receive more equity in the OpenAI Group in 2040 if the group's valuation reaches an estimated $5 trillion, or 10 times its current value. Asked for comment on the exact amount of the additional equity, an OpenAI spokesperson wrote in an email: "We can't provide a specific figure because the stake will scale with performance -- it's not a fixed percentage but instead is designed to ensure the nonprofit Foundation continues to be the largest long-term beneficiary of the for-profit's success." OpenAI was founded as a nonprofit entity by Altman, Elon Musk and nine other co-founders with a mission "to ensure that artificial general intelligence -- AI systems that are generally smarter than humans -- benefits all of humanity." Artificial general intelligence, or AGI, is a hotly debated concept, with many critics contending that such artificial intelligence is not attainable given current AI techniques, others arguing that AGI is a hopelessly nebulous concept, and other critics asserting that notions of AGI help investors inflate AI company valuations. Yet the concept of AGI is key to OpenAI's relationship with Microsoft. Since their initial partnership in 2019, Microsoft has secured broad rights to license and use intellectual property generated by OpenAI, except for intellectual property related to AGI. Before Tuesday's announcement, that exclusive access would have been revoked when OpenAI declared it had reached AGI. The new structure gives Microsoft rights to OpenAI's IP for its models and products through 2032 and will extend Microsoft's rights to OpenAI's research methods through 2030 or until an independent expert panel verifies claims of AGI, if that happens sooner. Some critics are not convinced the agreed-upon resolution is truly in the public's interest and instead see the announcement as a positive spin on existing plans. In a statement, the consumer advocacy organization Public Citizen wrote that with Tuesday's announcement, the "OpenAI Foundation will function as a corporate foundation, doing some good work but for the underlying purpose of advancing the interests of OpenAI For-Profit. The problem is, that's not how OpenAI Nonprofit was formed or what it is required to do -- the for-profit was (dubiously) created to advance the mission of the nonprofit, not the reverse." Referring to laws surrounding public benefit corporations, Gómez, the law professor, said: "The statute gives them a lot of breadth on when they decide to follow profit and when they decide to follow their nonprofit mission. I see that as a bit of an empty, unenforceable promise." Altman initially announced OpenAI's restructuring would feature a for-profit PBC last December, with a to-be-determined role for the founding nonprofit arm. California's attorney general inquired about OpenAI's plans given that "OpenAI, Inc.'s assets are irrevocably dedicated to its charitable purpose." The proposed transition was fiercely criticized by a coalition of nonprofit groups in April, who saw the move as a violation of OpenAI's nonprofit duties to steer its assets and proceeds towards public causes. As a result, OpenAI clarified in May that any for-profit entity would "continue to be overseen and controlled by that nonprofit." The Attorneys General of California and Delaware both declared Tuesday that they had no objection to OpenAI's recapitalization after close engagement with the company. OpenAI's main corporate entities are based in California and Delaware. In Tuesday's livestream and a separate statement Tuesday, Altman and other company leaders announced the OpenAI Foundation's first efforts would feature a $25 billion commitment across two areas: technical solutions to maximize benefits and minimize harms from AI and a focus on disease and health.

OpenAI Will Now Operate Like a For-Profit Company

This should allow OpenAI to pull in more investments the way other tech companies do, though it says the company remains committed to its original values. When OpenAI was started in 2015, its founders (including both Sam Altman and Elon Musk) chose to make it a nonprofit. Its initial goal was to guarantee that artificial general intelligence (AGI), a type of AI that is theoretically better at humans at most tasks, would benefit everyone. The company has gone through a number of changes in the years since. It hasn't been a true nonprofit since 2019, when it moved to a "capped-profit" structure, which limited profits to 100 times any investment. Musk even sued the company last year, claiming it had ditched its original mission in favor of profits. But now, OpenAI is looking more like a traditional for-profit company than ever. On Thursday, it announced the company will now operate under a new for-profit structure, called OpenAI Group PCB, a public benefit corporation. OpenAI's nonprofit arm, which is now called the OpenAI Foundation, holds a $130 billion stake in OpenAI Group PCB, and controls the for-profit company. OpenAI says it is particularly focused on how this move will affect its goals of achieving AGI, and ensuring that AGI "benefits all of humanity." As OpenAI sees it, the better its for-profit businesses perform, the more funds the OpenAI Foundation will have to continue its philanthropic work. To that point, OpenAI says the OpenAI Foundation is committing $25 billion to two key objectives. The first is to health and disease, as the OpenAI Foundation will aim to create open-sourced health datasets and offer funding for scientists. The second goal will be to bolster "AI resilience," which OpenAI sees as "maximizing AI's benefits and minimizing its risks." According to OpenAI, the OpenAI Foundation and OpenAI Group both have the same mission, and that the terms of the new structure require the for-profit side to advance that mission. The way OpenAI puts it, this move is the best of both worlds for the company. It asserts that it will continue to operate with the same values and goals as it did prior to this restructuring, while at the same time having more freedom to raise capital to fund those efforts. That second point is certainly true. CEO Sam Altman has been working for nearly two years to restructure the company into something that can more easily compete financially with other for-profit companies in the AI space, like Amazon, Google, and Meta. Other strictly-AI companies, like Anthropic and xAI, also have this type of structure. Already, the move has solidified funds for OpenAI: The Japanese-baed SoftBank had previously pledged to a $40 billion investment, with $10 billion in April and another $30 billion in December. However, that investment was contingent on the company's restructuring plans. Had OpenAI not restructured, SoftBank would've dropped its investment to $20 billion. By bolstering its for-profit core, OpenAI earned itself that extra $20 billion. OpenAI has also agreed to extend an agreement with Microsoft that allows the latter to use and sell OpenAI products. The original agreement ran through 2030, and allowed OpenAI to cancel the deal if the company achieved AGI. But now, the deal runs through 2032, even if OpenAI achieves AGI, so long as the tech has the "appropriate safety guardrails." An independent expert panel will make the call on whether OpenAI has achieved AGI. Rights to OpenAI's research will still be capped when OpenAI achieves AGI, or by 2030, whichever comes first. It's no secret that AI is big business, so this move could realistically continue OpenAI's many financial successes. It may also heat up the race to achieve AGI, as it now allows Microsoft to pursue that benchmark with OpenAI's technologies as well. But against this news is a lingering, and concerning, question: Are we in an AI bubble? And will that bubble burst? OpenAI currently has $1 trillion in AI deals, though only pulls in $13 billion in actual revenue. Perhaps its restructuring will allow it to develop more lucrative revenue streams, but even still, AI is generating a lot of investment without the tangible returns you'd necessarily expect.

Microsoft holds 27% of OpenAI in revamped partnership

San Francisco (United States) (AFP) - Microsoft and OpenAI announced Tuesday a sweeping overhaul of their landmark artificial intelligence (AI) partnership, giving both companies greater independence while maintaining their close collaboration. Microsoft will hold approximately 27 percent of the restructured OpenAI, an investment valued at roughly $135 billion, as the ChatGPT maker transitions to a public benefit corporation structure, according to a blog post on the OpenAI website. OpenAI has also committed to purchasing $250 billion in Azure cloud services from the tech giant, though Microsoft no longer holds first refusal rights as OpenAI's compute provider. In the deal, Microsoft's intellectual rights for both OpenAI's models and products are extended through 2032. "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," the companies said in a joint statement. Regulators have signed off on the arrangement, according to the companies. Microsoft has been a key investor in the ChatGPT-maker as OpenAI became the major player in the spending frenzy around generative AI, the technology that Silicon Valley believes will soon take over important aspects of everyday life. But OpenAI, under the leadership of CEO Sam Altman, has increasingly looked to expand its partnerships with other companies, raising questions as to whether its deal with Microsoft was still tenable. The partnership began in 2019 when Microsoft invested $1 billion in what was then a small AI research organization founded in 2015 by tech luminaries including Elon Musk. Microsoft deepened its commitment in 2021 with additional funding, and again in January 2023 with a reported $10 billion investment following the explosive popularity of OpenAI's ChatGPT chatbot, which launched in November 2022. The partnership transformed both companies. OpenAI evolved from a research lab into one of the world's most valuable startups, while Microsoft initially gained a commanding position in the AI race, integrating OpenAI's technology -- rebranded as Copilot -- across its product lineup from Bing search to Office applications. The relationship faced turbulence in November 2023 when OpenAI's board abruptly fired Altman, only to reinstate him days later following an employee revolt and pressure from Microsoft. The episode exposed 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. Curing ills? The arrangement will see OpenAI given 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," Altman said in a streamed chat. The initial focus of the OpenAI nonprofit that controls the public benefit coporation part of the startup is a $25 billion commitment to helping cure disease and maximizing benefits of generative AI while minimizing its risks, according to Altman. Microsoft, meanwhile, can independently pursue AGI development alone or with other partners. This refers to the pursuit of artificial general intelligence, a level of AI development that matches or exceeds human capability and was a crucial aspect in the company's previous agreements.

Microsoft and OpenAI announce finalized partnership deal

Why it matters: The capital hungry AI behemoth's move could accelerate its creative dealmaking activity. Zoom in: The OpenAI Foundation, the non-profit, now holds equity in OpenAI Group PBC -- a public benefit corporation valued around $130 billion. * The recap allows the foundation's ownership to grow as OpenAI reaches future valuation milestones. Microsoft will own 27%. * The current equity value is around $130 billion, and the recap allows for the foundation's ownership stake to grow as OpenAI Group reaches an undefined valuation milestone. * Microsoft will get a 27% share in OpenAI. Driving the news: OpenAI chairman Bret Taylor announced the recap in a blog post writing, "The more OpenAI succeeds as a company, the more the non-profit's equity stake will be worth, which the non-profit will use to fund its philanthropic work." * Microsoft also posted the news on its site, offering support for the reorganization. * OpenAI will remain Microsoft's frontier model partner and Microsoft will continue to have exclusive IP rights and Azure API exclusivity until OpenAI is able to verify Artificial General Intelligence (AGI) by an independent expert panel. What to watch: OpenAI's split model is poised to draw new capital -- and scrutiny -- as it redefines public-benefit governance at the top of tech's tier.

Microsoft Deepens OpenAI Ties with $135 Billion Stake and Updated Agreement | AIM

A key change is that OpenAI's declaration of AGI will now be verified by an independent expert panel. Microsoft and OpenAI have entered a new phase of their partnership, signing a definitive agreement that redefines their collaboration and ownership structure. The agreement supports OpenAI's move to form a public benefit corporation (PBC) and undergo recapitalisation. Following the change, Microsoft holds an investment in OpenAI Group PBC valued at around $135 billion, representing roughly 27% on an as-converted diluted basis, which includes all owners, employees, investors, and the OpenAI Foundation. Before the new funding rounds, Microsoft held a 32.5% stake in OpenAI's for-profit entity. In a statement, Microsoft said, "The agreement preserves key elements that have fueled this successful partnership". The new terms maintain Microsoft's role as OpenAI's exclusive frontier model partner, with continued exclusive IP and Azure API rights until Artificial General Intelligence (AGI) is declared. However, several aspects of the relationship have evolved to give both companies greater independence. A key change is that OpenAI's declaration of AGI will now be verified by an independent expert panel. Microsoft's IP rights for models and products are extended through 2032, and will include post-AGI models with defined safety measures. Microsoft's rights to research IP -- covering confidential methods used in model and system development -- will last until either AGI is verified or through 2030, whichever comes first. The rights exclude elements such as model architecture, weights, inference and finetuning code, and data centre IP. Microsoft's IP rights also now exclude OpenAI's consumer hardware. The agreement introduces new flexibility. OpenAI can jointly develop some products with third parties. API-based products created with partners will remain exclusive to Azure, while non-API products can run on any cloud provider. Microsoft can also independently pursue AGI, either on its own or with third parties. If it uses OpenAI's IP before AGI is declared, its systems will be subject to compute thresholds that are "significantly larger than the size of systems used to train leading models today." The revenue-sharing arrangement between the companies will continue until the expert panel verifies AGI, with payments spread over a longer timeframe. OpenAI has agreed to purchase an additional $250 billion worth of Azure services, but Microsoft will no longer have the right of first refusal to be OpenAI's compute provider. Additionally, OpenAI can now offer API access to US government national security customers on any cloud provider and release open-weight models that meet safety and capability criteria. "Both companies are better positioned than ever to continue building products that meet real-world needs and create new opportunities for everyone," Microsoft said in the announcement. OpenAI has completed its recapitalisation, restructuring its corporate setup to keep its nonprofit at the centre of operations while expanding access to major financial resources. The nonprofit entity, now called the OpenAI Foundation, retains control of the for-profit arm, OpenAI Group PBC, and holds equity currently valued at about $130 billion. This makes it one of the most well-funded philanthropic organisations globally. "The OpenAI Foundation and OpenAI Group will work in concert to advance solutions to hard problems and opportunities posed by AI progress," the company said in a statement. "This includes making intelligence a tool that everyone can benefit from, building safe and aligned systems, turbocharging scientific discovery, and strengthening global cooperation and resilience." The recapitalisation also grants the Foundation additional ownership as OpenAI's valuation crosses certain milestones. The nonprofit said this alignment ensures that as OpenAI grows, its mission to ensure artificial general intelligence (AGI) benefits all of humanity remains central. The Foundation will begin with a $25 billion commitment focused on two areas, which are health and AI resilience. It plans to fund open-sourced frontier health datasets, support scientific research, and develop technical infrastructure to strengthen AI systems' security and reliability. "Just as the internet required a comprehensive cybersecurity ecosystem...we now need a parallel resilience layer for AI," OpenAI said. The company said this builds on its $50 million People-First AI Fund and recommendations from its Nonprofit Commission. OpenAI, founded in 2015 as a nonprofit, established its for-profit arm in 2019 to raise capital while keeping its mission intact. With the new structure, the nonprofit retains control of the public benefit corporation, ensuring both mission and business goals move together. "This recapitalisation maintains the strongest representation of mission-focused governance in the industry today," OpenAI stated. The process was completed after nearly a year of discussions with the Attorneys General of California and Delaware. "We made several changes as a result of those discussions and we believe OpenAI -- and as a result, the public we serve -- are better for them," the company said. OpenAI said the recapitalisation provides "a direct path to major resources before AGI arrives," and enables the organisation to continue developing AI "in a way that reflects the world's collective interests."

OpenAI finalizes restructure and revises Microsoft partnership

OpenAI said Tuesday it has reorganized its ownership structure and converted its business into a public benefit corporation and two crucial regulators, the Delaware and California attorneys general, said they would not oppose the plan. The restructuring paves the way for the ChatGPT maker to more easily profit off its artificial intelligence technology even as it remains technically under the control of a nonprofit. Delaware Attorney General Kathy Jennings and California Attorney General Rob Bonta said in separate statements that they would not object to the proposal, seemingly bringing to an end more than a year of negotiations and announcements about the future of OpenAI's governance and the power that for-profit investors and its nonprofit board will have over the organization's technology. The company also said it has signed a new agreement with its longtime backer Microsoft that gives the software giant a roughly 27% stake in OpenAI's new for-profit corporation but changes some of the details of their close partnership.

Newly completed OpenAI restructuring gives Microsoft $135B stake - SiliconANGLE

Newly completed OpenAI restructuring gives Microsoft $135B stake OpenAI today disclosed that it has completed its more than year-long effort to change its organizational structure. The announcement doesn't come as a complete surprise. A few days ago, SoftBank Group Corp. reportedly approved a $22.5 billion funding round for OpenAI it had originally announced in March. The approval was contingent on the completion of the ChatGPT developer's restructuring initiative. OpenAI launched as a non-profit in 2015 and formed a for-profit arm four years later. Under the new organizational structure, the for-profit will be called the OpenAI Foundation. The for-profit arm, in turn, has been restructured as a public benefit corporation called OpenAI Group PBC. The reorganization is the culmination of a more than year-long effort that drew scrutiny from the attorneys general of California and Delaware. Originally, OpenAI had planned to remove its for-profit arm from the oversight of its nonprofit parent. The ChatGPT developer skipped that step to secure the attorneys generals' approval. OpenAI also made other changes to its original restructuring plan. Notably, the board committee that monitors its for-profit arm's artificial intelligence safety efforts will remain part of the OpenAI Foundation. The OpenAI Foundation is set to receive a $130 billion stake in the for-profit arm. According to OpenAI, that stake will grow if the for-profit's valuation surpasses a certain undisclosed threshold. Some of the OpenAI Foundation's shares will go toward a newly announced $25 billion program to support medical research and AI safety initiatives. "The more OpenAI succeeds as a company, the more the non-profit's equity stake will be worth, which the non-profit will use to fund its philanthropic work," OpenAI board chair Bret Taylor wrote in a blog post today. Microsoft Corp., one of OpenAI's most important investors, had a 32% stake prior to the reorganization. That stake has been reduced to 27.5%. In exchange, the tech giant received several favorable changes to its partnership agreement with OpenAI. The ChatGPT developer has signed a contract to purchase $250 billion worth of Azure cloud services over time. Additionally, it will broaden Microsoft's access to its AI models. Microsoft's access now extends to 2032 and encompasses any future models that OpenAI may designate as artificial general intelligence, or AGI. Such models weren't covered under the original partnership agreement. Microsoft will receive access to not only OpenAI's commercial models but also certain "confidential methods used in the development of models and systems." That doesn't include model architectures, weights or fine-tuning code. Additionally, OpenAI won't share the custom AI chips it's developing with Broadcom Inc. or its planned consumer hardware products. The companies also revised the terms of their go-to-market collaboration. Under the new partnership agreement, OpenAI may team up with third parties to develop certain types of products. However, offerings implemented as application programming interfaces will have to be sold exclusively on Azure. Microsoft, for its part, may now pursue AGI research independently of OpenAI. Furthermore, it can use OpenAI's intellectual property to support that research. OpenAI's simplified organizational structure could make it easier for the for-profit arm to raise funding. Additionally, the move may help clear the company's path to an eventual stock market listing. OpenAI Chief Executive Officer Sam Altman told Bloomberg that a public offering is currently not "top of mind" for the AI provider and a timeline has not yet been set.

OpenAI completes its restructuring into a for-profit company

OpenAI has finished a major restructuring that lets it operate as a for-profit business while its nonprofit foundation remains in control. The shift resolves a year of uncertainty about how the company behind ChatGPT would raise the enormous sums needed to develop AI technology, with the new structure giving it more flexibility to fundraise. OpenAI is currently valued at $500 billion. Under the new scheme, the nonprofit OpenAI Foundation keeps control of the business, the company said in a blog post, with a 26% stake valued at approximately $130 billion that makes it one of the wealthiest charities in the world. Microsoft, which has invested more than $13 billion in OpenAI since 2019, gets a 27% stake valued at $135 billion, while the remaining 47% is held by other investors and staff members. OpenAI said: "The more OpenAI succeeds as a company, the more the non-profit's equity stake will be worth, which the non-profit will use to fund its philanthropic work." Chief executive Sam Altman will not get equity in the restructured company, Bloomberg reported, citing OpenAI. Under the agreement, Microsoft will retain intellectual property rights for OpenAI's models and products through 2032, while any announcement by OpenAI that it has reached artificial general intelligence -- a long-held goal of the company -- must be reviewed by an independent panel of experts. Microsoft said: "As we step into this next chapter of our partnership, 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." Microsoft is scheduled to report first-quarter earnings after markets close on Wednesday.

'Close eye' will be kept on OpenAI's for-profit conversion, says California's attorney general

OpenAI has completed its transition to a for-profit company, after court battles and public criticism from one of its founders, Elon Musk. The company's for-profit arm will become a public benefit corporation - a company type that must consider both the mission and shareholder interests. But the non-profit arm will retain control over it to make sure OpenAI sticks to its mission of developing artificial intelligence to the "benefit of all humanity". The restructuring will make it easier for OpenAI to profit from its AI, which the company says will help it to realise its goal of developing artificial general intelligence (AGI). AGI would mean AI can perform any intellectual task that a human can. It is often seen as the holy grail for AI companies. In a call on Tuesday, OpenAI's chief executive Sam Altman said "the most likely path" for the newly formed business is that it becomes publicly traded on the stock market, "given the capital needs that we'll have and sort of the size of the company". The company also announced that Microsoft, a long-time backer of OpenAI, will now hold a roughly 27% stake in its new for-profit corporation, a slightly bigger share than OpenAI's own nonprofit. "We will be keeping a close eye on OpenAI to ensure ongoing adherence to its charitable mission and the protection of the safety of all Californians," said California Attorney General Rob Bonta. Read more technology news: Over 1.2 million people a week talk to ChatGPT about suicide Uncertainty for UK workers as Amazon to cut 14,000 jobs globally NHS to offer same-day AI prostate cancer diagnosis OpenAI said it completed its restructuring "after nearly a year of engaging in constructive dialogue" with the offices in both states. "OpenAI has completed its recapitalization, simplifying its corporate structure," said a blog post Tuesday from Bret Taylor, the chair of OpenAI's board of directors. "The nonprofit remains in control of the for-profit, and now has a direct path to major resources before AGI arrives." Read more: Musk v Altman: The battle to become king of AI When OpenAI initially suggested restructuring, Mr Musk asked a judge to block this from happening. He launched a legal case against the company in 2024, accusing it of a breach of contract. Mr Musk accused the ChatGPT developer of transforming into "a closed-source de facto subsidiary of the largest technology company, Microsoft", according to a court filing. "It is not just developing but is actually refining an AGI [artificial general intelligence] to maximise profits for Microsoft, rather than for the benefit of humanity," the court filing said. A legal battle ensued and earlier this year, Mr Musk offered to buy OpenAI for $97.4bn (£78.7bn) - an offer that was quickly rejected by Mr Altman, who told Sky News: "The company is not for sale." After announcing the changes on Tuesday, Mr Altman said: "California is my home, and I love it here, and when I talked to Attorney General Bonta two weeks ago I made clear that we were not going to do what those other companies do and threaten to leave if sued. "We really wanted to figure this out and are really happy about where it all landed - and very much appreciate the work of the Attorney General."

OpenAI may move forward with new business structure, partnership with Microsoft, regulator says

OpenAI said Tuesday it has reorganized its ownership structure and converted its business into a public benefit corporation and a crucial regulator, the Delaware attorney general, said she approved the plan. The restructuring paves the way for the ChatGPT maker to more easily profit off its artificial intelligence technology even as it remains technically under the control of a nonprofit. Delaware Attorney General Kathy Jennings said in a statement she did not object to the proposal, seemingly bringing to an end more than a year of negotiations and announcements about the future of OpenAI's governance and the power that for profit investors and its nonprofit board will have over the organization's technology. The company also said it has signed a new agreement with its longtime backer Microsoft that gives the software giant a roughly 27% stake in OpenAI's new for-profit corporation but changes some of the details of their close partnership. The attorneys general of Delaware, where OpenAI is incorporated, and California, where it is headquartered, had both said they're investigating the proposed changes. California Attorney General Rob Bonta's office didn't immediately respond to a request for comment Tuesday. OpenAI said it completed its restructuring "after nearly a year of engaging in constructive dialogue" with the offices in both states. "OpenAI has completed its recapitalization, simplifying its corporate structure," said a blog post Tuesday from Bret Taylor, the chair of OpenAI's board of directors. "The nonprofit remains in control of the for-profit, and now has a direct path to major resources before AGI arrives." AGI stands for artificial general intelligence, which OpenAI defines as "highly autonomous systems that outperform humans at most economically valuable work." OpenAI was founded as a nonprofit in 2015 with a mission to safely build AGI for humanity's benefit. OpenAI had previously said its own board will decide when AGI is reached, effectively ending its Microsoft partnership. But it now says that "once AGI is declared by OpenAI, that declaration will now be verified by an independent expert panel," and that Microsoft's rights to OpenAI's confidential research methods "will remain until either the expert panel verifies AGI or through 2030, whichever is first." Microsoft will also retain some commercial rights to OpenAI products "post-AGI." Microsoft put out the same announcement about the revised partnership Tuesday but declined further comment. Going forward, the nonprofit will be called the OpenAI Foundation and Taylor said it would grant out $25 billion toward health and curing diseases and protecting against the cybersecurity risks of AI. He did not say over what time period those funds would be dispersed. Robert Weissman, co-president of the nonprofit Public Citizen, said this arrangement does not guarantee the nonprofit independence, likening it to a corporate foundation that will serve the interests of the for profit. Even as the nonprofit's board may technically remain in control, Weissman said that control "is illusory because there is no evidence of the nonprofit ever imposing its values on the for profit."

OpenAI Says It Has New For-Profit Business Structure, Adjusts Partnership With Microsoft

SAN FRANCISCO (AP) -- OpenAI said Tuesday it has reorganized its ownership structure and converted its business into a public benefit corporation, paving the way for the ChatGPT maker to more easily profit off its artificial intelligence technology even as it remains technically under the control of a nonprofit. The company also said it has signed a new agreement with its longtime backer Microsoft that gives the software giant a roughly 27% stake in OpenAI's new for-profit corporation but changes some of the details of their close partnership. For more than a year, OpenAI's proposed changes to its corporate structure have drawn the scrutiny of regulators, competitors and advocates concerned about the societal impacts of AI. The attorneys general of Delaware, where OpenAI is incorporated, and California, where it is headquartered, had both said they're investigating the proposed changes. Neither office immediately responded to a request for comment Tuesday. OpenAI said it completed its restructuring "after nearly a year of engaging in constructive dialogue" with the offices in both states. "OpenAI has completed its recapitalization, simplifying its corporate structure," said a blog post Tuesday from Bret Taylor, the chair of OpenAI's board of directors. "The nonprofit remains in control of the for-profit, and now has a direct path to major resources before AGI arrives." AGI stands for artificial general intelligence, which OpenAI defines as "highly autonomous systems that outperform humans at most economically valuable work." OpenAI was founded as a nonprofit in 2015 with a mission to safely build AGI for humanity's benefit. OpenAI had previously said its own board will decide when AGI is reached, effectively ending its Microsoft partnership. But it now says that "once AGI is declared by OpenAI, that declaration will now be verified by an independent expert panel," and that Microsoft's rights to OpenAI's confidential research methods "will remain until either the expert panel verifies AGI or through 2030, whichever is first." Microsoft will also retain some commercial rights to OpenAI products "post-AGI." Microsoft put out the same announcement about the revised partnership Tuesday but declined further comment. Going forward, the nonprofit will be called the OpenAI Foundation and Taylor said it would grant out $25 billion toward health and curing diseases and protecting against the cybersecurity risks of AI. He did not say over what time period those funds would be dispersed. Robert Weissman, co-president of the nonprofit Public Citizen, said this arrangement does not guarantee the nonprofit independence, likening it to a corporate foundation that will serve the interests of the for profit. Even as the nonprofit's board may technically remain in control, Weissman said that control "is illusory because there is no evidence of the nonprofit ever imposing its values on the for profit."

OpenAI completes restructuring, signs new agreement with Microsoft

OpenAI has completed a restructuring of the company, converting its for-profit arm into a public benefit corporation and giving its nonprofit a controlling stake, the ChatGPT maker announced Tuesday. It also signed a new agreement with Microsoft, a major investor in the artificial intelligence (AI) firm that now holds a 27 percent stake in the company. "OpenAI has completed its recapitalization, simplifying its corporate structure," Bret Taylor, chair of the OpenAI board of directors, said in a blog post. "The nonprofit remains in control of the for-profit, and now has a direct path to major resources before AGI arrives." The AI firm initially detailed plans last December to restructure the company and remove the nonprofit's control over the for-profit arm. However, it ultimately walked back this plan in May, announcing the nonprofit would retain control following discussions with civic leaders and state officials. Under the restructuring announced Tuesday, the nonprofit now called the OpenAI Foundation will hold a stake worth about $130 billion, or 26 percent of the company. It can receive additional ownership as the for-profit company's valuation grows. Taylor underscored that this makes it "one of the best resourced philanthropic organizations ever." "The more OpenAI succeeds as a company, the more the non-profit's equity stake will be worth, which the non-profit will use to fund its philanthropic work," he added. The Microsoft deal, also announced Tuesday, will retain the close partnership between the two companies, with some key changes. Microsoft will now have intellectual property (IP) rights for OpenAI's models and products through 2032, including post-artificial general intelligence (AGI) models. AGI refers to technology that can achieve human-like intelligence. The new agreement also stipulates that an independent panel of experts will verify when OpenAI declares it has reached AGI. A revenue sharing agreement between the two companies will remain in place until AGI is reached. Under the deal, OpenAI will also now be free to develop some products with third parties, while Microsoft can develop AGI alone or with other parties.

OpenAI Creates For-Profit as New Microsoft Deal Defines the AGI Clause

* OpenAI Group PBC is valued at $130 billion * Microsoft can now develop AGI on its own * The Windows maker's IP rights now extend till 2032 OpenAI made significant headway in its corporate restructuring efforts on Wednesday, which have been ongoing for several months. The San Francisco-based artificial intelligence (AI) giant has completed the creation of its for-profit entity, now called OpenAI Group Public Benefit Corporation (PBC). It will be controlled by the non-profit OpenAI Foundation, which will have direct access to the PBC's capital. Additionally, the company has also struck a new agreement with Microsoft that future-proofs the partnership even if OpenAI reaches artificial general intelligence (AGI). OpenAI Group PBC Has Been Formalised In a post, OpenAI announced the completion of its recapitalisation, simplifying its corporate structure and the company's access to larger capital, which is not restricted by the obligations of the nonprofit entity. This is possible because of the creation of the PBC, which the company first mentioned in May. With this, OpenAI Foundation now holds equity in the for-profit, which is valued at roughly $130 billion (roughly Rs. 11.5 lakh crore). With this increased access to capital, the nonprofit will commit $25 billion (roughly Rs. 2.2 lakh crore) in two focus areas. The first is health, where the company will work to make breakthroughs in better diagnostics, treatments, and cures. The second is developing cybersecurity solutions to protect AI infrastructure. "The OpenAI mission -- ensuring that AGI benefits all of humanity -- will be advanced through both the business and the Foundation. The more OpenAI succeeds as a company, the more the non-profit's equity stake will be worth, which the non-profit will use to fund its philanthropic work," the post added. The New OpenAI-Microsoft Deal Central to OpenAI's for-profit ambitions was Microsoft's nod. The Windows maker is a key investor in the company and has a seat on the cap table. As such, the AI firm could not restructure itself without its consent. Over the last few months, the two companies have been at loggerheads with each other. However, in September, the companies announced that a new non-binding agreement had been signed between them, allowing the AI giant to proceed with its PBC plans. Now, both companies have revealed the terms of the new deal. The deal now marks the next phase of this relationship, with a focus on the future and more flexibility and independence for both parties. But that comes with a set of compromises. For Microsoft, that means giving up a part of the stake in the for-profit. The tech giant now owns roughly 27 percent of the new OpenAI Group PBC on an as-converted basis, down from the 32.5 percent stake it previously held. In return, Microsoft will remain OpenAI's "frontier model partner", meaning it will still get priority access to the company's most advanced models. Azure also remains the exclusive cloud platform for OpenAI's application programming interfaces (APIs), at least until AGI officially arrives. The AGI clause, which was previously vaguely defined, now has greater clarity. The companies have agreed that any formal declaration of AGI by OpenAI will be verified by an independent expert panel. That's significant because AGI has long been an ambiguous goal without clear oversight. Microsoft's intellectual property (IP) rights, essentially, its rights to use OpenAI's technology, have been extended through 2032, including rights to post-AGI models. However, OpenAI retains more control over its internal research, methods, and experimental systems. Notably, Microsoft's rights now exclude OpenAI's consumer hardware. But perhaps the most significant development in this new deal is that Microsoft is allowed to develop AGI on its own, either independently or with new partners. Meanwhile, OpenAI can now collaborate with third parties to build certain products, although anything delivered via APIs must still run on Azure. The deal also deepens the financial ties. OpenAI has agreed to purchase $250 billion (22 lakh crore) in Azure cloud services. As a side, Microsoft no longer has the right to be its exclusive compute provider. The companies have also extended their revenue-sharing arrangement until AGI is verified.

OpenAI may move forward with new business structure, partnership with Microsoft, regulators say

OpenAI has changed its ownership structure and become a public benefit corporation. This move allows the ChatGPT maker to profit more from its AI technology. Regulators in Delaware and California have agreed not to oppose the plan. OpenAI CEO Sam Altman indicated a stock market debut is likely. Microsoft's stake in the new for-profit company is about 27%. OpenAI said Tuesday it has reorganised its ownership structure and converted its business into a public benefit corporation after two crucial regulators, the Delaware and California attorneys general, said they would not oppose the plan. The restructuring paves the way for the ChatGPT maker to more easily profit off its artificial intelligence technology even as it remains technically under the control of a nonprofit. OpenAI CEO Sam Altman said in a call Tuesday that "the most likely path" for the newly formed business is that it becomes publicly traded on the stock market, "given the capital needs that we'll have and sort of the size of the company," though a Wall Street debut was not a part of the announcements detailed Tuesday. Delaware Attorney General Kathy Jennings and California Attorney General Rob Bonta said in separate statements that they would not object to the restructuring, seemingly bringing to an end more than a year of negotiations and announcements about the future of OpenAI's governance and the power that for-profit investors and its nonprofit board will have over the organization's technology. The company also said it has signed a new agreement with its longtime backer Microsoft that gives the software giant a roughly 27% stake in OpenAI's new for-profit corporation but changes some of the details of their close partnership. Microsoft's $135 billion stake will be just ahead of the OpenAI nonprofit's $130 billion stake in the for-profit company. The attorneys general of Delaware, where OpenAI is incorporated, and California, where it is headquartered, had both spent months investigating the proposed changes. "We will be keeping a close eye on OpenAI to ensure ongoing adherence to its charitable mission and the protection of the safety of all Californians," said Bonta. OpenAI said it completed its restructuring "after nearly a year of engaging in constructive dialogue" with the offices in both states. "OpenAI has completed its recapitalisation, simplifying its corporate structure," said a blog post Tuesday from Bret Taylor, the chair of OpenAI's board of directors. "The nonprofit remains in control of the for-profit, and now has a direct path to major resources before AGI arrives." AGI stands for artificial general intelligence, which OpenAI defines as "highly autonomous systems that outperform humans at most economically valuable work." OpenAI was founded as a nonprofit in 2015 with a mission to safely build AGI for humanity's benefit. It later started a for-profit arm. Microsoft invested its first $1 billion in OpenAI in 2019 and the two companies formed an agreement that made Microsoft the exclusive provider of the computing power needed to build OpenAI's costly technology. It was a lifeline for the startup research lab, which is now valued at $500 billion but continues to lose more money than it makes. In turn, Microsoft heavily used the technology behind ChatGPT to enhance its own AI products. The two companies first revealed in January that they were altering that agreement, enabling San Francisco-based OpenAI to build its own computing capacity, "primarily for research and training of models." That coincided with OpenAI's announcements of a partnership with Oracle and SoftBank to build a massive new data center in Abilene, Texas. It's since announced what Altman described Tuesday as a "$1.4 trillion total financial obligation" over the next few years, which includes more data center projects planned in the U.S., Asia, Europe and South America, along with big deals with chipmakers like Nvidia, AMD and Broadcom. Those investments left Microsoft's OpenAI arrangement up in the air as the two companies appeared to veer further apart before reaching a tentative new agreement in September. OpenAI had previously said its own nonprofit board will decide when AGI is reached, effectively ending its Microsoft partnership. But it now says that "once AGI is declared by OpenAI, that declaration will now be verified by an independent expert panel," and that Microsoft's rights to OpenAI's confidential research methods "will remain until either the expert panel verifies AGI or through 2030, whichever is first." Microsoft will also retain commercial rights to OpenAI products "post-AGI" and through 2032. "Microsoft can now count on 7 years of runway," said an investor note from JP Morgan analysts, interpreting the news as a positive development for the software giant. Microsoft put out the same joint announcement about the revised partnership Tuesday but declined further comment. Its shares spiked more than 2% on Tuesday. Going forward, the nonprofit will be called the OpenAI Foundation and Taylor said it would grant out $25 billion toward health and curing diseases and protecting against the cybersecurity risks of AI. He did not say over what time period those funds would be dispersed. Robert Weissman, co-president of the nonprofit Public Citizen, said this arrangement does not guarantee the nonprofit independence, likening it to a corporate foundation that will serve the interests of the for-profit. Even as the nonprofit's board may technically remain in control, Weissman said that control "is illusory because there is no evidence of the nonprofit ever imposing its values on the for-profit." The Delaware attorney general's investigation focused on ensuring OpenAI put its commitment to safety first and before any financial interests. Jennings also said OpenAI promised to keep its nonprofit in control of the public benefit corporation, including the right to appoint and remove its board members. The removal of OpenAI's CEO Sam Altman in Nov. 2023 by the nonprofit's board at the time - and his subsequent reappointment - kicked off the company's effort to restructure. The nonprofit's board will continue to include a Safety and Security Committee, which will have the power "to oversee and review" OpenAI's technology development. It will even have the power to stop the release of a new product, according to the Delaware attorney general's statement. Additionally, within a year, the nonprofit's board will include at least two members who do not also serve on the public benefit corporation's board. OpenAI still faces a legal challenge from billionaire Tesla CEO Elon Musk, an early OpenAI investor who now runs his own AI firm, xAI, and has accused the startup he co-founded of betraying its original mission. A federal judge in March denied Musk's request for a court order blocking OpenAI from converting itself to a for-profit company but said she could expedite a trial to consider Musk's claims.

OpenAI Transitions to Public Benefit Corporation as Microsoft-OpenAI Partnership Enters New Phase

OpenAI commits USD 250 billion in Azure purchases; Microsoft loses first-refusal rights. Microsoft and OpenAI have entered a new phase of their long-standing partnership, signing a definitive agreement that deepens their collaboration and redefines their relationship in the era of advanced artificial intelligence. The deal follows OpenAI's decision to restructure as a public benefit corporation (PBC), a move backed by Microsoft, which now holds an investment in OpenAI Group PBC valued at approximately USD 135 billion, representing about 27 percent on an as-converted diluted basis. Before OpenAI's recent funding rounds, Microsoft's stake stood at 32.5 percent on an as-converted basis in the OpenAI for-profit, according to a joint announcement by Microsoft and OpenAI on October 28, 2025. The agreement preserves the core pillars that have driven the partnership since its inception in 2019 -- Microsoft remains OpenAI's exclusive partner for frontier AI models and continues to hold exclusive rights for Azure API services until the achievement of Artificial General Intelligence (AGI). However, the new terms introduce greater flexibility for both organizations while ensuring continued cooperation and alignment on safety and innovation. Under the updated framework, any declaration of AGI by OpenAI will now be verified by an independent expert panel, adding external oversight to a milestone that could reshape the industry. Microsoft's intellectual property rights for both models and products have been extended through 2032, covering post-AGI systems under agreed safety guardrails. Rights to OpenAI's confidential research methods will remain in place until either AGI verification or 2030, while Microsoft retains non-research IP such as deployment and infrastructure-related technologies. OpenAI's consumer hardware is explicitly excluded from Microsoft's IP rights. OpenAI will now have greater latitude to collaborate with third parties, with Azure exclusivity applying only to API-based products, while non-API offerings may operate across other cloud providers. Microsoft, meanwhile, gains the right to pursue AGI independently or in partnership with other entities. Any use of OpenAI's IP by Microsoft before AGI is declared will be subject to defined compute thresholds, ensuring responsible use of shared technologies. Financially, OpenAI has committed to purchase an additional USD 250 billion in Azure cloud services, though Microsoft will no longer hold the right of first refusal for future compute contracts. The existing revenue-sharing agreement will continue until AGI is verified but will be paid out over a longer timeline. "OpenAI has contracted to purchase an incremental USD 250B of Azure services, and Microsoft will no longer have a right of first refusal to be OpenAI's compute provider," the official release said. In a significant shift, OpenAI can now offer API access to US government national security customers regardless of cloud provider, and may also release open-weight models that meet specific safety and capability standards. In a separate announcement, OpenAI said it had completed its recapitalization, simplifying its corporate structure. "The nonprofit remains in control of the for-profit, and now has a direct path to major resources before AGI arrives," the orignization stated. "The nonprofit, now called the OpenAI Foundation, holds equity in the for-profit currently valued at approximately USD 130 billion, making it one of the best resourced philanthropic organizations ever. The recapitalization also grants the Foundation additional ownership as OpenAI's for-profit reaches a valuation milestone," the official release said. The OpenAI Foundation will initially focus on a USD 25 billion commitment across two areas: 1. Health and curing diseases. The OpenAI Foundation will fund work to accelerate health breakthroughs so everyone can benefit from faster diagnostics, better treatments, and cures. This will start with activities like the creation of open-sourced and responsibly built frontier health datasets, and funding for scientists. 2. Technical solutions to AI resilience. Just as the internet required a comprehensive cybersecurity ecosystem -- protecting power grids, hospitals, banks, governments, companies, and individuals -- we now need a parallel resilience layer for AI. The OpenAI Foundation will devote resources to support practical technical solutions for AI resilience, which is about maximizing AI's benefits and minimizing its risks. According to OpenAI, this initiative builds on the USD 50 million People-First AI Fund and the recommendations of the Nonprofit Commission. "OpenAI was founded in 2015 as a nonprofit; its mission is to ensure artificial general intelligence benefits all of humanity. Today, OpenAI remains a nonprofit dedicated to that same mission," the official release said. Going forward, "the OpenAI Foundation and OpenAI Group will work in concert to advance solutions to hard problems and opportunities posed by AI progress. This includes making intelligence a tool that everyone can benefit from, building safe and aligned systems, turbocharging scientific discovery, and strengthening global cooperation and resilience."

OpenAI Completes For-Profit Transition, Extends Microsoft Partnership Until 2032

Once OpenAI declares AGI, it must be verified by an independent expert panel. After a long-drawn-out process, OpenAI has finally completed its for-profit transition to enable simpler recapitalization. It has created the OpenAI Foundation (valued $130B) which will be the non-profit entity, and it will control the OpenAI for-profit (OpenAI Group PBC) arm. Along with that, OpenAI and Microsoft have renewed their partnership, and the deal is extended until 2032. Microsoft's investment in OpenAI is now valued at $135 billion (roughly 27% stake). Prior to the recent funding, Microsoft's stake was around 32.5%. The most important detail to come out of this deal is that once OpenAI declares that it has achieved AGI (Artificial General Intelligence), an independent expert panel must verify the claim. Apart from that, Microsoft will retain IP rights for both OpenAI's models and products until 2032. Even after achieving AGI, the technology will be shared with appropriate safety guardrails. Notably, OpenAI in its blog post writes "Microsoft's IP rights to research, defined as the confidential methods used in the development of models and systems, will remain until either the expert panel verifies AGI or through 2030, whichever is first." OpenAI believes it may achieve AGI by 2030. And Microsoft is now free to pursue AGI independently or in partnership with third parties, which was blocked earlier. Finally, OpenAI is now free to choose its compute provider and Microsoft doesn't have a have a right of first refusal. After dropping its earlier plan to make OpenAI a pure for-profit company, the hot AI startup has now restructured the company to make fundraising easier. Recently, there were reports that suggested that Microsoft may abandon talks with OpenAI. In fact, at one point, OpenAI even considered filing antitrust accusation against Microsoft as tensions flared up. Now, both companies have finally reached a stable consensus. Meanwhile, the Wall Street Journal reports that OpenAI may go public as early as 2027. It will be interesting to see how OpenAI maintains its technological lead in the AI race.

Microsoft reveals 27% stake in OpenAI, shares jump 4%; ChatGPT maker now valued at $500 billion

Microsoft and OpenAI on Tuesday said they had reached a deal to allow the ChatGPT maker to restructure itself into a public benefit corporation, valuing OpenAI at $500 billion and clearing the way for it to become a publicly traded company. Microsoft and OpenAI on Tuesday said they had reached a deal to allow the ChatGPT maker to restructure itself into a public benefit corporation, valuing OpenAI at $500 billion and clearing the way for it to become a publicly traded company. Microsoft would hold a stake of about $135 billion - or 27% - in OpenAI Group PBC, which will be controlled by the OpenAI Foundation, a nonprofit. The deal removes a major constraint on raising capital for OpenAI, which was founded as a nonprofit AI safety group and which signed a deal in 2019 with Microsoft that gave the Redmond, Washington-based firm rights over much of OpenAI's work in exchange for providing the costly cloud computing services neede2d to carry it out. Microsoft shares jumped 4% on the deal, which could clear the way for OpenAI to become publicly traded in the future. The deal keeps the two firms intertwined until at least 2032 with a massive cloud computing contract and with Microsoft retaining some rights to OpenAI products and AI models until then even if OpenAI reaches artificial general intelligence (AGI), the point at which AI systems can match a well-educated human adult. Microsoft's previous 2019 agreement had many provisions that rested on when OpenAI reached that point, and the new deal requires an independent panel to verify OpenAI's claims it has reached AGI. "OpenAI has completed its recapitalization, simplifying its corporate structure," Bret Taylor, the OpenAI Foundation's board chair, said in a blog post. "The nonprofit remains in control of the for-profit, and now has a direct path to major resources before AGI arrives." Microsoft has invested $13.8 billion in OpenAI, with the deal on Tuesday implying that Microsoft had generated a return of nearly ten times its investment. Gil Luria, head of technology research at DA Davidson, said the deal "resolves the longstanding issue of OpenAI being organized as a not-for-profit (organization) and settles the ownership rights of the technology vis-a-vis Microsoft. The new structure should provide more clarity on OpenAI's investment path, thus facilitating further fundraising." Microsoft also said that it has secured a deal with OpenAI where the ChatGPT maker will purchase $250 billion of Azure cloud computing services. In exchange, Microsoft will no longer have a right of first refusal to provide computing services to OpenAI. Microsoft also said that it will not have any rights to hardware produced by OpenAI. In March, OpenAI bought longtime Apple design chief Jony Ive's startup io Products in a $6.5 billion deal.

OpenAI Strikes Deal With Microsoft in For-Profit Switch | PYMNTS.com

The artificial intelligence (AI) startup announced Tuesday (Oct. 28) that it had transformed its for-profit arm into a public benefit corporation. The new arrangement gives Microsoft a 27% stake -- worth roughly $135 billion -- in that unit. "What began as an investment in a research organization has grown into one of the most successful partnerships in our industry," OpenAI wrote on its blog. "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." The agreement gives Microsoft exclusive intellectual-property rights to OpenAI technology until 2032. OpenAI is purchasing another $250 billion worth of Microsoft's Azure cloud-computing services, the companies said, though Microsoft will no longer have a right of first refusal to be OpenAI's compute provider. In addition, the new arrangement allows Microsoft to now independently pursue artificial general intelligence (AGI) on its own or with third parties. (AGI refers to a version of AI that can perform at or above the level of humans.) OpenAI says that if and when AGI is "declared" by OpenAI, said declaration will be verified by an independent panel of experts. As many observers have noted, OpenAI's status could clear the path for the company to go public and help it attract more talent. Microsoft and OpenAI have been partners since 2019, with Microsoft investing $14 billion in the company. The deal follows a long stretch of negotiations between the companies, as well as debate over whether OpenAI could hold onto its initial mission. The question led to a lawsuit from Elon Musk's xAI and other parties over its corporate status, as critics contended that OpenAI had deviated from its nonprofit ethos by trying to convert into a for-profit company. OpenAI responded in April with a countersuit accusing Musk of engaging in fraudulent business practices under California law. The case is set to go to trial next year. Microsoft's move above the $4 trillion mark was not a first for that company, as it reached that level in July. However, fellow tech giant Apple also joined the $4 trillion club on Tuesday thanks to strong demand for the latest iPhone. Both companies sit just below Nvidia, valued at $4.78 trillion as of Tuesday afternoon.

Microsoft stock rises after reaching deal with OpenAI with a $135B stake

Shares of Microsoft (NASDAQ:MSFT) jumped about 4% premarket on Tuesday after the company signed an agreement with OpenAI (OPENAI) that would value its stake at about $135B in the AI giant. Microsoft said it supports the OpenAI board moving forward with formation of a public benefit corporation, or PBC, and recapitalization. Following the recapitalization, Microsoft holds an investment in OpenAI Group PBC valued at about $135B, representing around 27% on an as-converted diluted basis, inclusive of all owners -- employees, investors, and the OpenAI Foundation, the software giant said in a blog post on Tuesday. Microsoft noted that excluding the impact of OpenAI's recent funding rounds, the company held a 32.5% stake on an as-converted basis in the OpenAI for-profit. In addition, Microsoft said that OpenAI has contracted to buy an incremental $250B of Azure services, and Microsoft will no longer have a right of first refusal to be OpenAI's compute provider. "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)," said Microsoft in the blog post. AGI is a type of artificial intelligence that aims to mimic the cognitive abilities of the human brain. Under the agreement, once AGI is declared by OpenAI, that declaration will now be verified by an independent expert panel. Microsoft's IP rights for both models and products are extended through 2032 and now include models post-AGI, with appropriate safety guardrails. Microsoft's IP rights to research, defined as the confidential methods used in the development of models and systems, will remain until either the expert panel verifies AGI or through 2030, whichever is first, the company noted. Microsoft's IP rights now exclude OpenAI's consumer hardware. In May, OpenAI announced a partnership with former Apple (AAPL) executive Jony Ive, noting that Products, Inc. team officially merged with OpenAI. Ive and LoveFrom remain independent and assumed deep design and creative responsibilities across OpenAI. OpenAI CEO Sam Altman andIve intend to build a device for AI. Microsoft said OpenAI can now jointly develop some products with third parties. API products developed with third parties will be exclusive to Azure. Non-API products may be served on any cloud provider. In addition, Microsoft said that it can now independently pursue AGI alone or in partnership with third parties. The revenue share agreement remains until the expert panel verifies AGI, though payments will be made over a longer period of time. OpenAI can now provide API access to U.S. government national security customers, regardless of the cloud provider. More on Microsoft and OpenAI Microsoft's stake in OpenAI Group PBC is valued at about $135B, representing around 27% on an as-converted diluted basis after recapitalization. Microsoft retains IP rights and Azure API exclusivity until AGI, gains post-AGI model rights through 2032 with safety guardrails, but loses rights to OpenAI's consumer hardware and right of first refusal as compute provider. OpenAI will buy $250B of Azure services; API products with third parties remain exclusive to Azure, while non-API products can be hosted on any cloud provider. Today's chaos. Tomorrow's opportunity Seeking Alpha helps you make sense of the headlines. New! Get unlimited breaking stock news for free -- so you can stay on track for a stronger financial future.

Microsoft, OpenAI reach new deal valuing OpenAI at $500 bil. - The Korea Times

Microsoft and OpenAI reached a deal to allow the ChatGPT maker to restructure itself into a public benefit corporation, valuing OpenAI at $500 billion and giving it more freedom in its business operations. The deal removes a major constraint on raising capital for OpenAI that has existed since 2019, when it signed a deal with Microsoft that gave the tech giant rights over much of OpenAI's work in exchange for costly cloud computing services needed to carry it out. As its ChatGPT service exploded in popularity, those limitations became a notable source of tension between the two companies. CEO Sam Altman will not get equity in the restructured company, an OpenAI spokesperson said, in a reversal from discussions last year that he would receive equity. The company has no plans to focus on a potential public offering, the spokesperson said. Microsoft to keep 27 percent stake Microsoft will still hold a stake of about $135 billion, or 27 percent, in OpenAI Group PBC, which will be controlled by the OpenAI Foundation, a nonprofit, the companies said. The Redmond, Washington-based firm has invested $13.8 billion in OpenAI, with Tuesday's deal implying that Microsoft had generated a return of nearly 10 times its investment. Microsoft shares rose 2.5 percent, sending its market value above $4 trillion again. The deal keeps the two firms intertwined until at least 2032, with a massive cloud computing contract and with Microsoft retaining some rights to OpenAI products and AI models until then, even if OpenAI reaches artificial general intelligence (AGI), the point at which AI systems can match a well-educated human adult. With more than 700 million weekly users as of September, ChatGPT has exploded in popularity to become the face of AI for many consumers after OpenAI's founding as a nonprofit AI safety group. As the company grew, the Microsoft deal constrained OpenAI's ability to raise funds from outside investors and secure computing contracts as the crush of ChatGPT users and its research into new models caused its computing needs to skyrocket. "OpenAI has completed its recapitalization, simplifying its corporate structure," Bret Taylor, the OpenAI Foundation's board chair, said in a blog post. "The nonprofit remains in control of the for-profit, and now has a direct path to major resources before AGI arrives." Microsoft's previous 2019 agreement had many provisions that rested on when OpenAI reached that point, and the new deal requires an independent panel to verify OpenAI's claims it has reached AGI. "OpenAI still faces ongoing scrutiny around transparency, data usage, and safety oversight. But overall, this structure should provide a clearer path forward for innovation and accountability," said Adam Sarhan, CEO of 50 Park Investments. Gil Luria, head of technology research at investment firm DA Davidson, said the deal "resolves the longstanding issue of OpenAI being organized as a not-for-profit (organization) and settles the ownership rights of the technology vis-à-vis Microsoft. The new structure should provide more clarity on OpenAI's investment path, thus facilitating further fundraising." Microsoft also said that it has secured a deal with OpenAI where the ChatGPT maker will purchase $250 billion of Azure cloud computing services. In exchange, Microsoft will no longer have the right of first refusal to provide computing services to OpenAI. Microsoft also said that it will not have any rights to hardware produced by OpenAI. In March, OpenAI bought longtime Apple design chief Jony Ive's startup io Products in a $6.5 billion deal.

OpenAI Undergoes Recapitalisation Ahead Of Possible IPO

OpenAI has completed a major recapitalisation move that brings the equity stake of its non-profit entity within its for-profit business to about $130 billion. This effectively strengthens the nonprofit OpenAI Foundation's ownership stake as the for-profit entity reaches new valuation milestones. The company said the change simplifies its structure, giving the nonprofit direct access to substantial resources before the arrival of artificial general intelligence (AGI), and reinforces its mission of ensuring that AGI benefits all people. Importantly, alongside a separate agreement with Microsoft, the recapitalisation move sets up OpenAI for a potential initial public offering (IPO) in the near future. OpenAI says that the recapitalisation update provides clearer financial and operational structure, while defining a long-term framework for ownership and funding. For context, the OpenAI Foundation will begin with a $25 billion commitment across two focus areas: Importantly, the company said the restructuring followed nearly a year of engagement with the Attorneys General of California and Delaware over compliance and governance, resulting in several changes that were not publicly detailed. Furthermore, OpenAI said this initiative builds on its earlier $50 million People-First AI Fund and recommendations from its Nonprofit Commission. OpenAI was founded in 2015 as a nonprofit with the goal of ensuring that AGI benefits all of humanity. Under the new structure, the OpenAI Foundation retains overall control of the for-profit entity, while both organisations will collaborate on building safe and aligned AI systems, advancing scientific discovery, and strengthening global cooperation and resilience. Additionally, OpenAI said the recapitalisation "maintains the strongest representation of mission-focused governance in the industry," underscoring its intent to balance innovation with public accountability. In a separate announcement OpenAI said it had signed a new definitive agreement with Microsoft that aligns with the recapitalisation. Microsoft supports the formation of OpenAI Group PBC and now holds an investment valued at about $135 billion, representing roughly 27% ownership on an as-converted diluted basis. Notably, OpenAI remains Microsoft's frontier model partner, while Microsoft continues to have exclusive intellectual property (IP) rights and Azure API exclusivity until OpenAI declares AGI. The announcement also outlined new terms, including an independent expert panel to verify OpenAI's AGI (when it is declared), extended Microsoft IP rights through 2032, and OpenAI's ability to co-develop products with third parties and provide API access to US government national security customers. As per a Reuters report, the restructuring also positions OpenAI for a potential public listing. Chief Executive Officer (CEO) Sam Altman said during a livestream that an initial public offering is the most likely path for the company's future, given the capital required to build next-generation data centres and train advanced AI systems. Altman remarked that OpenAI has financial obligations amounting to $1.4 trillion to help construct roughly 30 gigawatts of data centre infrastructure in the next few years. The new agreement between Microsoft and OpenAI removes earlier capital-raising constraints that had caused tensions between these tech giants since their partnership began in 2019. Importantly, Microsoft will retain its 27% stake and a long-term revenue-sharing arrangement, while OpenAI will no longer be required to only use Microsoft exclusively for compute contracts. However, the AI giant has still agreed to purchase $250 billion worth of Azure's cloud computing services, Microsoft says. What is worth noting is that the restructuring and the Microsoft agreement consolidate OpenAI's nonprofit control, while easing funding limits: which could pave the way for a public listing and expanded AI infrastructure in the near future. The new structure redefines OpenAI's balance between nonprofit control and commercial ambition. By lifting earlier funding and compute restrictions, the company can now pursue large-scale infrastructure and research expansion while keeping Microsoft as a core strategic partner. Importantly, Microsoft's 27% stake and extended IP rights ensure continued collaboration, but also highlight how deeply intertwined the two companies remain in advancing frontier AI. At the same time, the possibility of an IPO marks a turning point in how OpenAI may finance its next phase of growth. A public listing would give it access to vast capital markets, but it also raises questions about how a nonprofit-led governance model will function once shareholder pressures enter the equation. As such, the coming years will test whether OpenAI can sustain its mission-driven structure while operating at the scale of a global technology powerhouse. Elsewhere, the OpenAI Foundation's equity stake, of around $130 billion, tied to a for-profit gives it significant influence over the direction of future research and funding. With a planned $25 billion commitment for health and AI resilience, the Foundation is positioned to shape not only OpenAI's own projects but also wider industry priorities. While this scale of funding can accelerate public-benefit research, yet it also concentrates decision-making power within a small group of leaders. How these resources are distributed and monitored will determine whether the company's claim of mission-led governance holds true.

Microsoft, OpenAI reach new deal valuing OpenAI at US$500 billion

Microsoft and OpenAI reached a deal to allow the ChatGPT maker to restructure itself into a public benefit corporation, valuing OpenAI at US$500 billion and giving it more freedom in its business operations. The deal removes a major constraint on raising capital for OpenAI that has existed since 2019, when it signed a deal with Microsoft that gave the tech giant rights over much of OpenAI's work in exchange for costly cloud computing services needed to carry it out. As its ChatGPT service exploded in popularity, those limitations became a notable source of tension between the two companies. CEO Sam Altman will not get equity in the restructured company, an OpenAI spokesperson said, in a reversal from discussions last year that he would receive equity. The company has no plans to focus on a potential public offering, the spokesperson said. Microsoft will still hold a stake of about $135 billion, or 27 per cent, in OpenAI Group PBC, which will be controlled by the OpenAI Foundation, a nonprofit, the companies said. The Redmond, Washington-based firm has invested $13.8 billion in OpenAI, with Tuesday's deal implying that Microsoft had generated a return of nearly 10 times its investment. Microsoft shares rose 2.5 per cent, sending its market value above $4 trillion again. The deal keeps the two firms intertwined until at least 2032, with a massive cloud computing contract and with Microsoft retaining some rights to OpenAI products and AI models until then, even if OpenAI reaches artificial general intelligence (AGI), the point at which AI systems can match a well-educated human adult. With more than 700 million weekly users as of September, ChatGPT has exploded in popularity to become the face of AI for many consumers after OpenAI's founding as a nonprofit AI safety group. As the company grew, the Microsoft deal constrained OpenAI's ability to raise funds from outside investors and secure computing contracts as the crush of ChatGPT users and its research into new models caused its computing needs to skyrocket. "OpenAI has completed its recapitalization, simplifying its corporate structure," Bret Taylor, the OpenAI Foundation's board chair, said in a blog post. "The nonprofit remains in control of the for-profit, and now has a direct path to major resources before AGI arrives." Microsoft's previous 2019 agreement had many provisions that rested on when OpenAI reached that point, and the new deal requires an independent panel to verify OpenAI's claims it has reached AGI. "OpenAI still faces ongoing scrutiny around transparency, data usage, and safety oversight. But overall, this structure should provide a clearer path forward for innovation and accountability," said Adam Sarhan, CEO of 50 Park Investments. Gil Luria, head of technology research at investment firm DA Davidson, said the deal "resolves the longstanding issue of OpenAI being organized as a not-for-profit (organization) and settles the ownership rights of the technology vis-à-vis Microsoft. The new structure should provide more clarity on OpenAI's investment path, thus facilitating further fundraising." Microsoft also said that it has secured a deal with OpenAI where the ChatGPT maker will purchase $250 billion of Azure cloud computing services. In exchange, Microsoft will no longer have the right of first refusal to provide computing services to OpenAI. Microsoft also said that it will not have any rights to hardware produced by OpenAI. In March, OpenAI bought longtime Apple design chief Jony Ive's startup io Products in a $6.5 billion deal.

Microsoft, OpenAI reach new deal to allow OpenAI to restructure

(Reuters) -Microsoft said on Tuesday it has reached a deal with OpenAI to allow the ChatGPT maker to restructure itself into a public benefit corporation, following which Microsoft would hold a stake of about $135 billion - or 27% - in the AI startup. Microsoft shares jumped 4% on the deal, which could clear the way for OpenAI to become publicly traded in the future. Microsoft also said that it has secured a deal with OpenAI where the ChatGPT maker will purchase $250 billion of Azure cloud computing services. In exchange, Microsoft will no longer have a right of first refusal to provide computing services to OpenAI. Microsoft's earlier agreement with OpenAI gave it intellectual property rights to OpenAI's products and models until 2030, or until OpenAI achieved artificial general intelligence (AGI). Microsoft said that its product and model rights now extend to 2032 and that those rights will continue until then even if a panel of independent experts verifies a declaration by OpenAI that it has achieved AGI. (Reporting by Deborah Sophia in Bengaluru and Stephen Nellis in Washington; Editing by Devika Syamnath and Franklin Paul) By Stephen Nellis and Deborah Mary Sophia