On Thursday, Microsoft Corp. MSFT and OpenAI signed a non-binding agreement to reset the terms of their high-profile partnership, a move that could clear the way for ChatGPT-parent's restructuring into a for-profit entity as it pursues a $500 billion valuation.
The companies said they are working toward a definitive deal that will redefine their relationship.
Microsoft first invested $1 billion in OpenAI in 2019, followed by another $13 billion.
Under the prior arrangement, Microsoft had exclusive rights to resell OpenAI tools on Azure and preferred access to its models.
Those terms have been gradually loosened. OpenAI has already struck cloud contracts with Oracle Corp ORCL and Alphabet Inc.'s GOOG GOOGL Google while pursuing its own $300 billion data center project, codenamed Stargate.
The new deal is expected to give OpenAI a more conventional corporate structure while ensuring Microsoft retains access to its advanced models.
See Also: Jim Cramer Says Microsoft Paying Amazon’s Anthropic For AI Is ‘Big’: Redmond Shifting Strategy?
According to a memo from Bret Taylor, chair of OpenAI's nonprofit board, the nonprofit arm could receive more than $100 billion—about 20% of OpenAI's projected $500 billion valuation, reported Reuters.
That would make it one of the wealthiest nonprofits in the world.
Regulatory approvals remain a hurdle. Attorneys general in California and Delaware must sign off on the conversion, which OpenAI aims to finalize by year's end to avoid losing billions in tied-up funding.
OpenAI is accelerating efforts to diversify its technology base. Earlier this month, reports revealed a $10 billion partnership with Broadcom Inc. AVGO to mass-produce proprietary AI chips starting in 2026, reducing reliance on Nvidia Corp. NVDA.
At the same time, OpenAI is exploring a secondary stock sale that could raise its private market valuation to $500 billion, up from $300 billion earlier this year.
That jump follows a record $40 billion funding round in April led by SoftBank Group Corp. SFTBY, with Microsoft also participating.
Price Action: Microsoft shares inched up 0.13% on Thursday and have climbed 19.69% so far this year, according to Benzinga Pro.
Benzinga's Edge Stock Rankings show that while MSFT faces minor short-term swings, it continues to post solid medium and long-term growth. More detailed performance insights are available here.
Read Next:
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo courtesy: Shutterstock