Microsoft and OpenAI Move Forward with New Agreement

Microsoft (MSFT) and OpenAI announced that they have reached a new agreement. This development will accelerate the ChatGPT developer's plans to transition into a profit-driven public benefit corporation.

According to the new agreement, Microsoft will own 27% of OpenAI Group Public Benefit Corporation, and this stake will be valued at approximately $135 billion. On the other hand, OpenAI's non-profit arm will have a stake valued at $130 billion in the profit-making structure. However, Microsoft will not have the first right of refusal as OpenAI's cloud service provider. Still, OpenAI is reported to be purchasing $250 billion worth of Azure services.

The agreement also alters Microsoft’s duration of using OpenAI’s models and products. Microsoft will be able to use OpenAI's intellectual property until 2032, excluding OpenAI's consumer hardware. This includes the intellectual property developed after OpenAI announces it has achieved artificial general intelligence (AGI). Now, there will need to be a third-party expert group to verify that OpenAI has reached AGI.

While Microsoft retains the right to use OpenAI's models and products until 2032, this period will not cover consumer hardware. However, with the achievement of AGI, Microsoft will either lose OpenAI's research rights or this will happen by 2030 at the latest, whichever comes first. With the validation of AGI, Microsoft's revenue-sharing agreement with OpenAI will also end.

This agreement allows OpenAI to develop products with third parties, while API products will be exclusive to Microsoft's Azure cloud platform. Other products can utilize any cloud service provider.

Microsoft is also permitted to independently work on AGI. However, if the tech giant achieves this success using OpenAI's technology, it will be subject to limitations on processing power.

Microsoft was one of the biggest and most influential names opposing OpenAI's profit-driven plans. This agreement has allowed both companies to achieve significant gains through their partnerships. OpenAI's substantial spending on the Azure cloud platform has led to an increase in Microsoft's stock prices. Microsoft has invested billions of dollars into OpenAI.

Thus, both companies are positioning themselves ahead of competitors like Amazon and Google in the future. Meanwhile, OpenAI also has large-scale expansion plans. Among these plans is the Stargate Project, which will include a series of large data centers across the country using Oracle's cloud services.