Microsoft and OpenAI Agreement: Value 135 Billion Dollars

Microsoft (NASDAQ:MSFT) announced on Tuesday that its updated agreement with OpenAI will value the AI developer's share at approximately $135 billion; this development boosted stock prices.

Shares rose by about 3% on Tuesday morning after Microsoft indicated that the new arrangement would represent about 27% of OpenAI's stake on a diluted basis following a recapitalization. Under previous terms, this percentage was set at 32.5%.

As part of the agreement, Microsoft will continue to hold Azure API rights and certain intellectual property arrangements until 2032. It will also provide extended intellectual property protection concerning enhanced models with security measures. The terms of the agreement indicate that OpenAI's consumer hardware will be exempt from Microsoft’s intellectual property rights, while Microsoft has waived its priority purchase rights for some OpenAI computing services.

This agreement also encompasses the commercial terms for Microsoft's cloud business: OpenAI is committed to offering more Azure services, while it was stated that API products sold to third parties would be limited to Azure. It was also noted that products outside the API could be hosted on other cloud providers.

Microsoft stated that the new framework allows it to maintain its capability to continue advanced AI work, including independent AGI research, and supports broader commercial collaborations with OpenAI and third parties.