Microsoft, OpenAI reach non-binding deal to allow ChatGPT maker to restructure

San Francisco – Microsoft and OpenAI said on Sept 11 they have signed a non-binding deal for new relationship terms that will allow OpenAI to proceed to restructure itself into a for-profit company, marking a new phase of the most high-profile partnerships to fund the ChatGPT frenzy.

Details of the new commercial arrangements were not disclosed, but the companies said they are working to finalise terms of a definitive agreement. This marks a step forward in OpenAI’s prolonged talks with Microsoft as the former seeks to raise capital under a more common governance structure and eventually go public to fund artificial intelligence (AI) development.

Microsoft invested US$1 billion (S$1.28 billion) in OpenAI in 2019 and another US$10 billion at the beginning of 2023. Under their previous agreement, Microsoft had exclusive rights to sell OpenAI’s software tools through its Azure cloud computing platform and had preferred access to the start-up’s technology.

Microsoft was once designated as OpenAI’s sole compute provider, though it lessened its grip in 2025 to allow OpenAI to pursue its own data centre project, Stargate, including signing US$300 billion worth of long-term contracts with Oracle, as well as another cloud deal with Google.

As OpenAI’s revenue grows into the billions, it is seeking a more conventional corporate structure and partnerships with additional cloud providers to expand sales and secure the computing capacity needed to meet demand.

Microsoft, meanwhile, wants continued access to OpenAI’s technology even if OpenAI declares its models have reached human-like intelligence – a milestone that would end the current partnership under existing terms.

OpenAI said that under current terms, its non-profit arm will receive more than US$100 billion – about 20 per cent of the US$500 billion valuation it is seeking in private markets. This will make it one of the most well-funded non-profits, according to a memo from Mr Bret Taylor, chairman of OpenAI’s current non-profit board.

The companies did not disclose how much of OpenAI Microsoft will own, nor whether Microsoft will retain exclusive access to OpenAI’s latest models and technology.

Regulatory hurdles remain for OpenAI, as attorneys-general in California and Delaware need to approve OpenAI’s new structure. The company hopes to complete the conversion by year-end or risk losing billions in funding tied to that timeline.

Microsoft and OpenAI compete on products ranging from consumer chatbots to AI tools for businesses. Microsoft has also been working on developing its own AI models to reduce its dependence on OpenAI’s technologies. REUTERS