Microsoft and OpenAI announced the long-awaited details of their new partnership agreement Tuesday morning — with concessions on both sides that keep the companies aligned but not in lockstep as they move into their next phases of AI development.
Under the arrangement, Microsoft gets a 27% equity stake in OpenAI’s new for-profit entity, the OpenAI Group PBC (Public Benefit Corporation), a stake valued at approximately $135 billion. That’s a decrease from 32.5% equity but not a bad return on an investment of $13.8 billion.
At the same time, OpenAI has contracted to purchase an incremental $250 billion in Microsoft Azure cloud services. However, in a significant concession in return for that certainty, Microsoft will no longer have a “right of first refusal” on new OpenAI cloud workloads.
Microsoft, meanwhile, will retain its intellectual property rights to OpenAI models and products through 2032, an extension of the timeframe that existed previously.
A key provision of the new agreement centers on Artificial General Intelligence (AGI), with any declaration of AGI by OpenAI now subject to verification by an independent expert panel. This was a sticking point in the earlier partnership agreement, with an ambiguous definition of AI potentially triggering new provisions of the prior arrangement.
Microsoft and OpenAI had previously announced a tentative agreement without providing details. More aspects of the deal are disclosed in a joint blog post from the companies.
Shares of Microsoft are up 2% in early trading after the announcement. The company reports earnings Wednesday afternoon, and some analysts have said the uncertainty over the OpenAI arrangement has been impacting Microsoft’s stock.
