Microsoft, OpenAI restructure partnership, granting more independence

Microsoft and OpenAI announced Tuesday a major overhaul of their AI partnership, giving both companies greater independence while maintaining close collaboration.

Under the new arrangement, Microsoft will hold roughly 27 percent of the restructured OpenAI, an investment valued at around $135 billion, as OpenAI transitions to a public benefit corporation structure. OpenAI has also committed to purchasing $250 billion in Azure cloud services from Microsoft, although the tech giant no longer holds first refusal rights as OpenAI’s compute provider. Microsoft’s intellectual property rights for OpenAI’s models and products are extended through 2032.

“As we enter the next phase of this partnership, we’ve signed a new definitive agreement that builds on our foundation, strengthens our partnership, and sets the stage for long-term success for both organizations,” the companies said in a joint statement. Regulators have approved the deal.

The partnership, which began in 2019 with Microsoft’s $1 billion investment, deepened in 2021 and 2023, helping OpenAI become a major player in generative AI and giving Microsoft a commanding position in AI integration across Bing, Office, and other products. The collaboration faced turbulence in November 2023 when OpenAI’s board briefly fired CEO Sam Altman, only to reinstate him after employee and Microsoft pressure.

The new deal allows OpenAI more flexibility to develop products with third parties and host some services on competing cloud platforms. Altman said the nonprofit controlling OpenAI’s public benefit corporation will focus on a $25 billion commitment to tackling disease and maximizing AI’s societal benefits while minimizing risks.

Microsoft, meanwhile, can continue pursuing artificial general intelligence (AGI) independently or with other partners, maintaining a key goal of the previous agreements.