Microsoft (MSFT) and OpenAI (OPAI.PVT) announced on Tuesday that they have reached a new agreement that lets the ChatGPT developer move forward with its plans to transform into a for-profit public benefit corporation.
Under the new agreement, Microsoft will hold 27% of the OpenAI Group PBC, valued at roughly $135 billion, while OpenAI’s nonprofit arm will hold a $130 billion stake in the for-profit entity. Microsoft, however, will no longer have the right of first refusal to serve as OpenAI’s cloud provider. The company, however, said OpenAI has contracted to purchase $250 billion worth of Azure services.
The agreement also modifies the duration of Microsoft’s rights to use OpenAI’s models and products. Microsoft will now be able to use OpenAI’s IP, excluding consumer hardware, which OpenAI is working on with Jony Ive, through 2032.
That also includes IP developed after OpenAI declares it has reached artificial general intelligence, or AI that can think like a human. A third-party group of experts will now have to verify OpenAI’s claim that it has achieved artificial general intelligence (AGI).
Microsoft will retain rights for OpenAI’s models and products, excluding consumer hardware, through 2032. That includes models and products developed after OpenAI declares it has achieved general intelligence, something that wasn’t part of the original agreement.
But Microsoft will lose the rights to OpenAI’s research either when the panel confirms OpenAI has achieved AGI or through 2030, whichever comes first. Microsoft will also end its revenue-sharing agreement with OpenAI when AGI is confirmed.
The agreement also allows OpenAI to develop products with third parties, but API products will be exclusive to Microsoft’s Azure cloud platform. Non-API products can use any cloud vendor.
Microsoft is also now allowed to pursue AGI on its own, but if the tech giant achieves the feat using OpenAI’s technology before OpenAI itself does, it will be limited to compute thresholds.
Microsoft was one of the biggest and most consequential holdouts to OpenAI’s for-profit plan, which now clears the way for the effort to move forward.
Both companies have benefited immensely from their relationship, with Microsoft’s stock price soaring thanks to the huge amount of cash OpenAI has spent on its Azure cloud platform. Microsoft, meanwhile, provided billions in investments to OpenAI.
That has helped put the two companies in the lead in the AI race, ahead of the likes of Amazon (AMZN) and Googl (GOOGL, GOOG).
