Microsoft and OpenAI signaled Thursday afternoon that they’ve agreed in principle on changing and continuing one of the defining partnerships of the AI era.
Their three-sentence joint statement, announcing a non-binding memorandum of understanding, followed months of difficult negotiations. It gave away almost nothing on the surface — reflecting the fact that the deal still needs to be finalized.
But a major clue was embedded in OpenAI’s companion statement about the equity stake that the OpenAI nonprofit entity will hold in a new public benefit corporation (PBC) that will be enabled by the deal, and in which Microsoft will apparently also play a major role.
“As previously announced and as outlined in our non-binding MOU with Microsoft, the OpenAI nonprofit’s ongoing control would now be paired with an equity stake in the PBC,” the statement said. “Today, we are sharing that this new equity stake would exceed $100 billion — making it one of the most well-resourced philanthropic organizations in the world.”
The disclosure of the valuation in conjunction with the MOU gives a sense for the massive scale of the computing and capital that Microsoft will be providing as part of the tentative deal.
What is Microsoft getting in return? That’s not yet clear.
However, one of the thorniest issues in their talks has been OpenAI’s ability to declare the arrival of artificial general intelligence (AGI) and unilaterally dissolve the partnership — potentially cutting Microsoft off just as its multi-billion-dollar investment reached its a key moment. It would be hard to imagine that the new agreement doesn’t resolve that issue.
Under their partnership, Microsoft has provided massive computing power to OpenAI, fueling its work on ChatGPT and other breakthroughs. Microsoft has received, in return, exclusive rights OpenAI’s technology on its Azure cloud platform, along with a tight technology partnership that has helped Microsoft integrate OpenAI innovations into its products.
It’s not yet clear what will happen to those provisions under the newly announced MOU.
However, recent developments also suggest the new era will bring more flexibility for both Microsoft and OpenAI to work with other industry partners.
- The Wall Street Journal reported that OpenAI has signed a contract to purchase $300 billion in computing from Oracle over roughly five years.
- The Information reported that Microsoft will now use technology from OpenAI’s primary rival, Anthropic, to power some of the new AI features in its Office 365 software.
In conjunction with the announcement Thursday, OpenAI also sought to preempt critics, rivals, and regulators who have questioned its plans to further expand its for-profit ambitions.
“This recapitalization would also enable us to raise the capital required to accomplish our mission — and ensure that as OpenAI’s PBC grows, so will the nonprofit’s resources, allowing us to bring it to historic levels of community impact,” OpenAI said in its statement.
OpenAI’s nonprofit recently launched a $50 million grant program for community groups, an early signal of how it intends to use its newfound resources for public impact.
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