Early OpenAI backer Microsoft loosens its AI infrastructure ties with the ChatGPT creator while securing one of the largest cloud commitments in history.
In a new company update, OpenAI announces that it has completed its recapitalization, which aims to simplify its corporate structure as the firm gears up for the arrival of artificial general intelligence (AGI).
The firm says it has established the OpenAI Foundation, a nonprofit that will have control over its for-profit business, the OpenAI Group, valued at around $130 billion. OpenAI says the structure gives it both the capital and independence to pursue AGI with long-term mission alignment.
Tech titan Microsoft says it supports OpenAI’s corporate restructure. Following the recapitalization, Microsoft owns a roughly 27% stake in OpenAI Group worth roughly $135 billion. The move also allows Microsoft and OpenAI to refine their partnership, including a major shift in compute arrangements.
“OpenAI has contracted to purchase an incremental $250B of Azure services, and Microsoft will no longer have a right of first refusal to be OpenAI’s compute provider.”
About three years ago, Microsoft committed $10 billion to OpenAI to become its exclusive cloud provider through the end of the decade in exchange for shares in revenue and future profits. But the deal led to tensions between the two firms amid OpenAI’s requirements for additional compute and Microsoft’s inability to meet the demand.
Both firms eventually agreed to shatter the exclusivity deal, but Microsoft had the right of first refusal for new server deals. If OpenAI wanted to buy compute from another provider, Microsoft got the first chance to match the deal and take it instead.
With the new arrangement, OpenAI no longer has to offer Microsoft first dibs on compute partnerships.
Earlier this week, Softbank greenlit a second $22.5 billion installment to complete its planned $30 billion investment in OpenAI. The deal hinges on OpenAI finalizing a corporate overhaul that would clear the path for a potential initial public offering (IPO).
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