Microsoft and OpenAI have finalized an agreement to convert OpenAI into a public benefit corporation valued at $500 billion.
This restructuring eliminates key capital-raising restrictions imposed by their 2019 partnership.
Under the original deal, Microsoft gained extensive rights to OpenAI's technology in return for providing essential cloud computing resources.
The explosive growth of ChatGPT, now boasting over 700 million weekly users as of September, intensified strains from these constraints as OpenAI's computing demands surged.
OpenAI CEO Sam Altman will not receive equity in the new entity, reversing prior considerations.
The company has no immediate plans for a public offering.
Microsoft retains a 27 percent stake worth approximately $135 billion in OpenAI Group PBC, controlled by the nonprofit OpenAI Foundation.
This represents nearly a tenfold return on Microsoft's $13.8 billion investment.
Microsoft shares climbed 2.5 percent, pushing its market capitalization above $4 trillion once more.
The partnership extends until at least 2032, including a $250 billion commitment from OpenAI to purchase Azure cloud services.
In exchange, Microsoft relinquishes its right of first refusal for OpenAI's computing needs.
Microsoft will maintain rights to OpenAI products and AI models until 2032, even if artificial general intelligence is achieved—the threshold where AI matches a well-educated human adult.
An independent panel will verify any AGI claims by OpenAI.
Provisions from the 2019 agreement tied to AGI milestones have been updated.
OpenAI's recent $6.5 billion acquisition of Jony Ive's startup io Products means Microsoft holds no rights to resulting hardware.
"The nonprofit remains in control of the for-profit, and now has a direct path to major resources before AGI arrives," Bret Taylor, chair of the OpenAI Foundation board, stated in a blog post.
The deal resolves longstanding issues with OpenAI's nonprofit status and clarifies technology ownership relative to Microsoft.
It is expected to streamline future fundraising and provide greater operational clarity.