Microsoft and OpenAI have a long-standing relationship. Since 2019, the two companies have worked together to expand their positions in the world of AI. And now, they are coming together to announce some big changes in their partnership, most notably with Microsoft increasing its share in the OpenAI company.
“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 company stated in a blog post.
This new system means Microsoft will now have a stake in OpenAI with an approximate value of $135 billion. Microsoft will also have access to the company’s technology until 2032, including models that achieved AGI benchmarks — a more powerful type of AI that companies are aiming for. For OpenAI, it will remain Microsoft’s frontier model partner.
While it wasn’t listed in the announcement post from Microsoft and OpenAI, Bloomberg reports that an insider on the matter has stated Microsoft will continue to be entitled to receive 20% of OpenAI’s revenue.
Why is this restructuring needed?
This change in the system of OpenAI has been planned for a while now. When OpenAI first launched, it did so as a non-profit research lab, focused on developing AI that benefits humanity. Obviously, since then, the company has blown up, seeing a huge rise in popularity and interest.
In 2019, it created a capped-profit subsidiary, allowing huge investments that could allow it to build and train models like ChatGPT, which require a lot of funding. When it did this, it created a new structure, allowing it to remain a non-profit while getting investments from companies like Microsoft.
Now, with the recently announced deal with Microsoft, OpenAI becomes a public benefit corporation, essentially becoming a for-profit entity.
In other words, while OpenAI used to be a company that focused entirely on enhancing the world of AI, with all money going back into the business, the restructuring allows the company to become more profitable, rewarding shareholders for their investments and removing any profit ceilings.
This is big news for both OpenAI and Microsoft. For OpenAI, it allows for more money to flow in and out, offering larger amounts of investment into big new projects like proposed data centres and new AI models.
For Microsoft, it means its investments in OpenAI are no longer capped, effectively meaning unlimited profits, only matched by OpenAI’s growth.
We recently covered how Anthropic had worked out a clear path for profitability in the world of AI, focusing on its corporate relationships. It seems OpenAI is now also going down a similar road.
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