The pact reduces Microsoft's exclusivity, enabling OpenAI to partner with other cloud providers like Oracle for its "Stargate" data center.
In a move that signals the next chapter of the artificial intelligence gold rush, Microsoft and OpenAI have inked a new, non-binding agreement that restructures their landmark partnership. Through the agreement, OpenAI will be able to become a for-profit business, pursue a valuation of $500 billion, and acquire the processing power required for its next-generation AI, which includes the ambitious "Stargate" data center project.
Although the final terms are not yet set, the new arrangement significantly alters the Microsoft-OpenAI partnership. It moves beyond the previous structure, where Microsoft was the exclusive commercial cloud provider and had preferred access to all technology. The new agreement enables OpenAI to move forward with a major corporate restructuring, transitioning from its distinctive “capped-profit” model to a standard for-profit structure. This change is essential for OpenAI to raise vast new capital from private markets and eventually pursue an initial public offering (IPO).
Thanks to the tremendous demand for ChatGPT and its API services, OpenAI's revenue is currently in the billions. To continue funding the astronomical costs of AI development—including training ever-larger models—it needs access to unprecedented amounts of capital. A for-profit structure is the clearest path to that funding. According to a memo from OpenAI board chairman Bret Taylor, the company's nonprofit arm is set to receive over $100 billion from this restructuring, making it one of the world's most well-funded charities.
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Even if a milestone like Artificial General Intelligence (AGI)—human-like intelligence—is attained, Microsoft's main objective is to provide ongoing, privileged access to OpenAI's ground-breaking technologies. The existing partnership terms would end at that point, so this new deal is a strategic move to lock in a long-term relationship. Furthermore, as OpenAI’s value grows, Microsoft’s significant equity stake (the size of which remains undisclosed) becomes exponentially more valuable.
This deal is a green light for OpenAI's independence in securing computing power. Previously, Microsoft was designated as OpenAI’s sole compute provider. This year, that grip loosened as OpenAI began pursuing its own $300+ billion data center project, codenamed "Stargate," and signed massive long-term cloud contracts with competitors like Oracle and even Google. The new commercial terms formally endorse this multi-cloud strategy, which is vital for OpenAI to meet global demand and avoid being locked into a single provider.
The transformation is not yet complete. The companies must still finalize the definitive agreement. More critically, regulatory approval is required from the Attorneys General in both California and Delaware for OpenAI to legally change its corporate structure. The company is racing against the clock, hoping to complete the conversion by year's end to avoid losing billions in funding tied to that deadline.
