OpenAI and Microsoft Reach Nonbinding Deal to Form Public Benefit Corporation

OpenAI said Thursday it reached a nonbinding deal with Microsoft to reshape their partnership. The move would let OpenAI convert its for-profit arm into a Public Benefit Corporation (PBC). If regulators sign off, the shift could help the AI startup raise more money, attract large investors, and set the stage for a possible IPO.

Nonprofit Oversight Remains

OpenAI board chair Bret Taylor said in a blog post that the nonprofit will remain in place. It will still control company operations. The nonprofit will also get a big equity stake in the new PBC. Taylor hinted the stake could be worth over $100 billion.

Microsoft and OpenAI confirmed the agreement in a joint statement. They said the memorandum of understanding (MOU) is not legally binding but sets expectations. Both sides are now working to finalize a formal contract.

This deal follows months of tough talks. Unlike other startups, OpenAI is run by a nonprofit board. That governance model made headlines in 2023, when the board fired CEO Sam Altman before reinstating him days later. Several board members quit, but the same structure still holds today.

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Microsoft’s Role and OpenAI’s Growth

Microsoft has invested more than $13 billion in OpenAI since 2019. Under the current setup, Microsoft gets preferred access to OpenAI’s models like ChatGPT. It also remains the main cloud provider through Azure.

But OpenAI is far bigger now. Demand for generative AI has soared. The company is pushing to reduce its reliance on Microsoft and build new partnerships.

In 2024, OpenAI signed a $300 billion, five-year deal with Oracle Cloud, starting in 2027. It also teamed with SoftBank on the Stargate data center project. These moves point to a multi-cloud future and less dependence on one partner.

Friction Between Partners

Negotiations were tense. Reports say Microsoft wanted control of Windsurf’s technology. OpenAI had tried to acquire the AI coding startup. That deal collapsed. Windsurf’s founders joined Google, while other staff moved to Cognition, another AI startup.

The for-profit transition has also drawn lawsuits and criticism. Elon Musk sued OpenAI, accusing Sam Altman and Greg Brockman of abandoning the nonprofit mission. Musk even made a $97 billion takeover offer, but the board rejected it. Under the new deal, OpenAI’s nonprofit stake is even larger than what Musk proposed.

Nonprofits like Encode and The Midas Project also oppose the shift. They argue it risks OpenAI’s founding promise to build AGI for humanity’s benefit. OpenAI countered with subpoenas, saying those groups may be backed by rivals such as Musk and Meta CEO Mark Zuckerberg. The groups deny it.

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What Happens Next

OpenAI and Microsoft are now working with California and Delaware attorneys general. Regulators must approve the change before it takes effect.

If approved, OpenAI could become one of the most valuable public benefit corporations in history. The model blends profit with public mission. For AI, it could shape how future companies balance growth, ethics, and control.

Why It Matters

• AI governance: Raises questions on whether mission-driven nonprofits can thrive in a competitive AI market.

• Cloud competition: Deals with Oracle and SoftBank show that AI infrastructure is the new battleground.

• Investor interest: A PBC opens doors for ESG funds and large institutions.

• Global race: Rivals like Anthropic, Google DeepMind, and xAI are moving fast. OpenAI needs more funding to keep pace.

• Regulatory focus: Governments are watching AI safety, antitrust, and accountability closely.

FAQs

1. What is a Public Benefit Corporation (PBC)?

It is a company that pursues profits while keeping a stated public mission. OpenAI wants this model to raise capital and still keep nonprofit oversight.

2. Does this mean OpenAI will launch an IPO?

Not yet. But becoming a PBC makes an IPO easier in the future.

3. What does Microsoft gain from this deal?

It keeps preferred access to OpenAI’s tech and remains the main cloud provider via Azure.

4. Why are critics against OpenAI’s shift?

They fear that profit motives could weaken the company’s mission to create AGI for humanity.

5. Will this affect ChatGPT users?

No big changes for now. Users can still access ChatGPT and other tools. Long-term, faster updates and new pricing models may emerge.