Microsoft and OpenAI have announced a new phase in their partnership, signing a non-binding memorandum of understanding. While the final terms are still being worked out, the deal is expected to define how the two companies share technology and the revenue generated from it. A significant part of the new agreement reportedly involves changes to a key clause from their original partnership. That clause stated Microsoft could not access OpenAI’s most powerful technology if its board decided it had achieved human-like artificial general intelligence, or AGI. The new terms modify this arrangement, though specific details on the changes have not been disclosed.
In a major structural move, OpenAI is also granting an equity stake worth a minimum of one hundred billion dollars to its nonprofit arm. This nonprofit will continue to oversee and control the entire organization. This equity transfer is a crucial step that paves the way for OpenAI to transition into a public benefit corporation. This type of corporate structure is designed for companies that aim to make a positive impact on society. The shift also clears a path for a potential future initial public offering for OpenAI.
Before this transition could move forward, OpenAI needed to reach an acceptable agreement with its largest investor, Microsoft. Microsoft has invested over thirteen billion dollars into OpenAI and is entitled to forty-nine percent of its future profits. The new deal finalizes the terms of this relationship, including how much equity Microsoft receives in OpenAI’s for-profit subsidiary.
Reports about OpenAI moving away from its unique and complicated nonprofit structure began emerging last year. The company officially confirmed its plan after Christmas in 2024, announcing its intent to transform into a public benefit corporation with ordinary shares of stock. At the time, OpenAI stated that this new structure would enable it to raise necessary capital with conventional terms, similar to other companies in the tech industry. However, in a reversal this past May, OpenAI announced it would no longer proceed with a plan that would have removed the control of its for-profit arm from its nonprofit board. The company reaffirmed its foundational principle, stating that it was founded as a nonprofit and would continue to be overseen and controlled by that nonprofit entity going forward. This new agreement with Microsoft solidifies that ongoing oversight while allowing for the corporate evolution needed to fund its ambitious AI development.
