Microsoft gives OpenAI restructuring plans the green light – but its terms ensure it still wins in the long run

OpenAI has completed its transformation into a public benefit corporation, with Microsoft retaining a 27% stake.

OpenAI was founded in 2015 as a non-profit, with a declared mission of ensuring that artificial general intelligence (AGI) benefits all of humanity. Its restructuring plans, aimed at raising funds, have been fraught with difficulty thanks to regulatory and legal issues.

Under the new format, the company's non-profit arm, now called the OpenAI Foundation, will retain control of OpenAI's for-profit division and will hold an equity stake in the company of around $130 billion.

This, OpenAI said, makes it one of the best resourced philanthropic organizations ever.

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"The OpenAI mission — ensuring that AGI benefits all of humanity — will be advanced through both the business and the Foundation," said Bret Taylor, chair of the OpenAI board of directors.

"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 OpenAI Foundation will initially focus on a $25 billion commitment across two areas. First, it will fund work to accelerate health breakthroughs, through activities such as the creation of open-sourced and responsibly-built frontier health datasets, along with funding for scientists.

Secondly, it will support the development of technical solutions to AI resilience, maximizing AI’s benefits and minimizing its risks.

The new deal with Microsoft hinges on the development of AGI.

"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)," Microsoft said in a statement.

"It also refines and adds new provisions that enable each company to independently continue advancing innovation and growth."

What Microsoft gets out of the OpenAI restructuring

Under the terms of the deal, Microsoft’s IP rights for both models and products will be 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 tech giant’s IP rights exclude OpenAI’s consumer hardware, and OpenAI can now jointly develop some products with third parties. API products developed with third parties will be exclusive to Azure, while non-API products may be served on any cloud provider.

Meanwhile, Microsoft can now independently pursue AGI alone or in partnership with third parties.

Moving forward, OpenAI has agreed to purchase an incremental $250 billion of Azure services, with Microsoft no longer having a right of first refusal to be OpenAI’s compute provider.

"As we step into this next chapter of our partnership," said Microsoft, "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."

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