OpenAI and Microsoft reportedly hire bankers to renegotiate partnership
OpenAI and its longtime partner Microsoft have reportedly hired investment bankers to determine the tech giant’s stake in OpenAI’s newly established for-profit structure. This move comes as OpenAI transitions from its original non-profit model to a for-profit company, a shift that follows a recent round of investments from high-profile companies including Microsoft and Nvidia.
Microsoft has been integral to OpenAI's growth and development since the early days, playing a key role in turning the AI research lab into one of the most prominent companies in the field of artificial intelligence. Over the years, Microsoft has invested billions in OpenAI, beginning with a $1 billion commitment in 2019 to help fund the development of advanced AI models. This was followed by a larger $10 billion investment in 2023.
This partnership has also provided OpenAI with the necessary computing infrastructure, using Microsoft's Azure cloud platform to train large language models, including GPT, and develop cutting-edge AI systems like ChatGPT.
OpenAI CEO drama and Microsoft Intervention
In a dramatic series of events in late 2023, Altman was removed from his position as CEO by OpenAI's board, reportedly due to disagreements over the company’s future direction. The board, consisting largely of researchers and individuals with strong concerns about the ethical implications of AI, was resistant to Altman’s push for greater commercialization of OpenAI’s technologies.
Altman’s vision for OpenAI involved scaling its commercial endeavors while advancing AI research, a plan that some within the organization feared could conflict with OpenAI's mission of ensuring that AI is developed safely and responsibly. However, Altman's removal sparked a backlash among employees and key stakeholders, including Microsoft, leading to his reinstatement.
In the aftermath of Altman’s return, OpenAI has formally shifted to a for-profit structure, a move aimed at attracting more investments and sustaining its growth as AI continues to reshape industries globally. However, what remains unclear is how much of a stake Microsoft will hold in OpenAI’s for-profit entity.
According to the Wall Street Journal, the current terms of the partnership specify that Microsoft will receive most of OpenAI’s initial profits until it recoups its investment. Microsoft will subsequently be given a 49% stake in the company. But, the two companies are said to have hired investment bankers to help renegotiate the partnership. According to sources speaking to the WSJ, OpenAI is being advised by Goldman Sachs while Microsoft has reportedly hired Morgan Stanley.
Besides the size of Microsoft’s stake in OpenAI, the negotiations will reportedly focus on what governance rights it will receive. 49% stake doesn’t give it any control over the AI startup, and the tech giant gave up its seat on the OpenAI board after the Altman saga.
As OpenAI’s for-profit restructuring efforts continue, the final determination of Microsoft's stake and interests will have significant implications for both company’s future.
