Microsoft and OpenAI strike new deal, valuing OpenAI at $500 billion
Microsoft and OpenAI have struck a deal that will enable OpenAI to restructure as a public benefit corporation, with a valuation of $500 billion. This move provides OpenAI with greater flexibility in its business operations.
The deal removes a major constraint on raising capital for OpenAI that has existed since 2019, when it signed a deal with Microsoft that gave the tech giant rights over much of OpenAI's work in exchange for costly cloud computing services needed to carry it out. As its ChatGPT service exploded in popularity, those limitations became a notable source of tension between the two companies, News.Az reports citing forein media.
CEO Sam Altman will not get equity in the restructured company, an OpenAI spokesperson said, in a reversal from discussions last year that he would receive equity. The company has no plans to focus on a potential public offering, the spokesperson said.
Microsoft will still hold a stake of about $135 billion, or 27 percent, in OpenAI Group PBC, which will be controlled by the OpenAI Foundation, a nonprofit, the companies said.
The Redmond, Washington-based firm has invested $13.8 billion in OpenAI, with Tuesday's deal implying that Microsoft had generated a return of nearly 10 times its investment.
Microsoft shares rose 2.5 percent, sending its market value above $4 trillion again.
The deal keeps the two firms intertwined until at least 2032, with a massive cloud computing contract and with Microsoft retaining some rights to OpenAI products and AI models until then, even if OpenAI reaches artificial general intelligence (AGI), the point at which AI systems can match a well-educated human adult.
Similar news
