“Microsoft and OpenAI have signed a non-binding memorandum of understanding (MOU) for the next phase of our partnership,” the companies wrote in a joint statement.
The partnership has shown increasing strain as OpenAI has grown from a research lab into a company valued at $500 billion.
Both companies now compete for customers, and OpenAI seeks more compute capacity than Microsoft can provide.
Thursday’s MOU with Microsoft suggests the companies are working to align on this modified restructuring plan.
Microsoft disclosed in recent earnings that Azure has become a $75 billion annual business, with significant contributions from OpenAI-related services.
A non-binding agreement to update their partnership was announced by OpenAI and Microsoft on Thursday. This is the most recent step in a relationship that has become more complicated as both businesses vie for clients in the AI market and look for new alliances to meet expanding infrastructure requirements.
The companies jointly announced that Microsoft and OpenAI had inked a non-binding memorandum of understanding (MOU) for the next stage of their collaboration. “We’re working hard to get the terms of the contract finalized in a binding contract. Based on our mutual dedication to safety, we are still committed to providing the greatest AI tools for everybody. “.”.
The announcement comes as OpenAI looks to change its organization from nonprofit to for-profit, a move that needs Microsoft’s consent because the company is OpenAI’s biggest investor, having committed more than $13 billion since 2019.
The relationship has become more strained as OpenAI has expanded from a research lab to a $500 billion business. Both businesses now vie for clients, with OpenAI aiming for more processing power than Microsoft can offer. The relationship has also been complicated by clauses in the contract that would restrict Microsoft’s access to OpenAI technology once the company achieves so-called AGI (artificial general intelligence), a vague milestone that both businesses now define economically as AI systems that can make at least $100 billion in profit.
OpenAI renounced its initial plan to become a fully for-profit business in May due to increasing pressure from regulators, critics, including Elon Musk, and former employees. Because he believes the conversion violates OpenAI’s original purpose as a nonprofit organization committed to helping people, Musk has filed a lawsuit to stop it.
Instead, the company announced a modified strategy that would turn its for-profit subsidiary into a public benefit corporation while maintaining control by the nonprofit board. OpenAI chairman Bret Taylor announced in May that the nonprofit would become the largest shareholder under this new arrangement, holding a stake of over $100 billion. The companies are reportedly trying to coordinate on this revised restructuring plan, according to Thursday’s MOU with Microsoft.
significant risks associated with restructuring.
The attorneys general in California and Delaware are still reviewing the proposed conversion and must approve the restructuring. Additionally, a group of nonprofit organizations has urged authorities to put a stop to the proposal.
According to a January blog post by Microsoft, the partnership’s main components—access to OpenAI’s intellectual property, revenue-sharing plans, and exclusivity on OpenAI’s APIs—remain in effect until 2030. Microsoft’s previous exclusivity as OpenAI’s only cloud provider was replaced by a right of first refusal model for compute capacity under that agreement.
In the six years since the two companies first struck an investment agreement, the AI industry has grown rapidly, from experimental research labs to multi-hundred-billion-dollar infrastructure investments. This has resulted in a rapidly shifting relationship between two once-steadfast partners. While Microsoft has extended Azure to accommodate rival models from Meta, xAI, and DeepSeek, OpenAI has broadened its infrastructure alliances, including involvement in the $500 billion Stargate Project with Oracle and SoftBank.
Their fortunes are still closely linked even though both businesses are making an effort to lessen their reliance on one another. According to Microsoft’s most recent earnings, Azure has grown to be a $75 billion yearly company, with OpenAI-related services accounting for a sizable portion of this growth.
