Microsoft deal brings OpenAI closer to becoming a for-profit firm

Microsoft and OpenAI announced on Thursday that they have signed a non-binding deal to extend their partnership after months of fraught discussions.

The agreement allows OpenAI the possibility of restructuring itself into a for-profit company, shifting the firm’s focus after it was founded for charitable purposes in 2015. The restructuring could also prepare the company for an Initial Public Offering.

The nonprofit arm of OpenAI will continue to control the for-profit company and will hold an equity stake worth over $100 billion (€85bn) in the new firm. It is not yet clear what percentage of the company that will amount to, although media reports point to a stake of at least 20%.

This would make the nonprofit “one of the most well-resourced philanthropic organisations in the world”, said OpenAI Chairman Bret Taylor.

He added: “OpenAI started as a nonprofit, remains one today, and will continue to be one — with the nonprofit holding the authority that guides our future.”

Microsoft invested $1 billion in OpenAI in 2019 and another $10 billion at the beginning of 2023. It is among OpenAI’s largest backers, it is the firm’s exclusive cloud provider, and it also has access to its latest technology.

It is still unclear what stake Microsoft will hold in the restructured firm, although Financial Times sources estimated the holding at roughly 30%.

Further details of the new partnership are not yet public.

“We are actively working to finalise contractual terms in a definitive agreement,” said the companies in a statement on Thursday.

OpenAI still requires approval from regulators in California and Delaware to go ahead with the restructuring.

Such a shake-up would allow the firm to focus more heavily on generating returns for shareholders, rather than just fulfilling philanthropic aims.