Microsoft and OpenAI have reached an agreement that will allow the ChatGPT developer to restructure into a public benefit corporation, valuing OpenAI at $500 billion and giving it more freedom in business operations. This is reported by UNN with reference to Reuters.
Details
The agreement removes a major restriction on capital raising for OpenAI that had been in place since 2019, when the company signed a deal with Microsoft that gave the tech giant rights to a significant portion of OpenAI's work in exchange for the expensive cloud computing services needed to perform it. As the ChatGPT service rapidly grew in popularity, these restrictions became a notable source of tension between the two companies.
Microsoft will still own a stake of about $135 billion, or 27%, in OpenAI Group PBC, which will be controlled by the non-profit OpenAI Foundation, the companies said. The Redmond, Washington-based firm has invested $13.8 billion in OpenAI, and the deal struck on Tuesday means Microsoft has made nearly ten times its investment.
Microsoft shares rose 2.5%, pushing its market value back above $4 trillion.
The agreement maintains the link between the two firms until at least 2032 through a massive cloud computing contract, and Microsoft retains some rights to OpenAI's products and AI models until then, even if OpenAI achieves artificial general intelligence (AGI), the point at which AI systems can match a well-educated adult.
With over 700 million weekly users as of September, ChatGPT has exploded in popularity, becoming the face of AI for many consumers after OpenAI was founded as a non-profit AI safety group. As the company grew, the deal with Microsoft limited OpenAI's ability to raise funds from external investors and enter into computing contracts, as the influx of ChatGPT users and research into new models led to a sharp increase in its computing needs.
"OpenAI has completed a recapitalization, simplifying its corporate structure," Bret Taylor, chairman of the OpenAI Foundation board, said in a blog post. "The non-profit remains in control of the commercial entity and now has a direct path to core resources until AGI emerges."
Microsoft's previous 2019 agreement contained many provisions that were based on the moment OpenAI reached this point, and the new agreement requires an independent committee to verify OpenAI's claims that it has achieved AGI.
"OpenAI still faces ongoing scrutiny regarding transparency, data usage, and safety oversight. But overall, this structure should provide a clearer path for innovation and accountability," said Adam Sarhan, CEO of 50 Park Investments.
Gil Luria, head of technology research at DA Davidson, said the deal "solves the long-standing problem of OpenAI's organization as a non-profit and settles the ownership rights of the technology in relation to Microsoft. The new structure should provide more clarity on OpenAI's investment path, thereby facilitating further fundraising."
Microsoft also said it had reached an agreement with OpenAI under which the ChatGPT developer would purchase $250 billion worth of Azure cloud computing services. In exchange, Microsoft will no longer have the right of first refusal to provide computing services to OpenAI.
Microsoft also said it would not have any rights to hardware produced by OpenAI. In March, OpenAI acquired the startup IO Products from long-time Apple design executive Jony Ive for $6.5 billion.
Addition
Sam Altman's OpenAI continues to integrate the generative artificial intelligence model into an everyday tool for most people around the globe - the browser. After a high-profile launch this week and a challenge to Google Chrome, the company is already promising a number of new improvements and pleasant surprises for users.