Microsoft Adjusts Cloud Exclusivity, Grants OpenAI Right of First Refusal
Microsoft has proposed reducing its ownership stake in OpenAI’s new for-profit entity in exchange for continued access to future AI models developed after 2030, when a significant contract expires
OpenAI and Microsoft are renegotiating the terms of their multibillion-dollar partnership to enable OpenAI to pursue a future initial public offering while ensuring Microsoft retains access to its advanced AI models, the Financial Times reported.
As per the report, Microsoft has proposed reducing its ownership stake in OpenAI’s new for-profit entity in exchange for continued access to future AI models developed after 2030, when a significant contract expires.
A central issue in the talks is determining how much equity Microsoft will hold in the restructured company in return for its investment of over $13 bn in OpenAI to date.
The renegotiation of a contract, originally drafted when Microsoft invested $1 bn in OpenAI in 2019, is pivotal to OpenAI’s transition to a for-profit structure, into which Microsoft has since invested billions more, according to the Financial Times.
Facing pressure from former employees, academics, competitors and billionaire Elon Musk, OpenAI is reevaluating its plan to transition from a nonprofit to a for-profit corporation.
Back to Non-Profit
OpenAI recently announced that it is proceeding with plans to restructure its for-profit division as a public-benefit corporation while keeping the overall business under the control of its nonprofit entity, a significant shift that largely preserves the company’s existing structure.
“We made the decision for the nonprofit to retain control of OpenAI after hearing from civic leaders and engaging in constructive dialogue with the offices of the attorney general of Delaware and the attorney general of California,” OpenAI board chairman Bret Taylor said in a statement, referring to the two states responsible for reviewing the restructuring. “We thank both offices and look forward to continuing these important conversations.”
Founded a decade ago as a nonprofit to develop artificial intelligence for the benefit of humanity, OpenAI established a for-profit subsidiary four years later to fund the high costs of AI development. In December 2024, OpenAI announced it was exploring a transition to a public-benefit corporation, with its nonprofit arm retaining shares in the for-profit entity but relinquishing control.
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