Microsoft and OpenAI Navigate Tense Partnership Restructuring Talks
Microsoft has invested heavily in OpenAI, the creator of ChatGPT, pouring over 13 billion dollars into the startup and becoming its largest backer. However, OpenAI is now looking to evolve beyond its non profit roots, aiming for a corporate restructure that could eventually lead to an Initial Public Offering (IPO). This significant shift requires renegotiating its relationship with Microsoft, which currently appears to be the main party needing persuasion.
According to a recent report (subscription required), the two companies are engaged in serious discussions to redefine their multibillion dollar partnership. The outcome of these talks is crucial, potentially determining whether OpenAI can pursue an IPO while retaining access to the essential technology and infrastructure developed with Microsoft's support.
A major point of negotiation revolves around the equity stake Microsoft will hold in OpenAI's revamped business structure. Reports suggest both parties are also revising their original 2019 contract, which outlined Microsoft's access to OpenAI models and products, as well as revenue sharing arrangements.
Sources indicate Microsoft might be willing to reduce its equity share in return for guaranteed access to new OpenAI technologies beyond the current agreement's 2030 expiration date. Such a compromise could pave the way for OpenAI's desired corporate structure and significantly impact its long term trajectory.
OpenAI CEO Sam Altman has previously stated his ambition is to achieve artificial general intelligence (AGI), technology capable of surpassing human performance. While OpenAI recently paused controversial governance changes that would have diminished the non profit board's control, it remains committed to transforming its commercial division into a Public Benefit Corporation (PBC). This structure aims to balance profitability with a positive social mission, a path also taken by competitors like Anthropic and xAI.
A source familiar with OpenAI's strategy noted that becoming a PBC is considered essential for a potential public offering. However, the path isn't entirely smooth. Insiders report growing friction between OpenAI and Microsoft as their strategic objectives begin to diverge.
While Microsoft continues to provide vital computing resources for OpenAI and integrates its models into products like Copilot, OpenAI is also developing independent projects, such as the large scale computing initiative known as Stargate, potentially involving SoftBank and Oracle. This independent streak hasn't been universally welcomed within Microsoft.
An anonymous senior Microsoft employee commented on the dynamic, stating, "The friction comes partly due to style. OpenAI says to Microsoft ‘gives us money and compute and stay out of the way: be happy to be on the ride with us.’ So naturally this leads to tensions. To be honest, that is a bad partner attitude, it shows arrogance." This comment was reportedly made in May 2025.
Despite these tensions, the relationship hasn't reached a breaking point. A source close to OpenAI affirmed that Microsoft remains invested in making the partnership succeed.
OpenAI began in 2015 as a non profit co founded by Sam Altman, Elon Musk, and others. In 2019, it established a for profit subsidiary that allowed investors to share in profits, albeit up to a predetermined limit. Initially, investments were framed more like donations, but recent funding rounds have adopted a distinctly commercial focus.
In October, OpenAI secured 6.6 billion dollars from investors including Microsoft, SoftBank, and Thrive Capital. This was followed by another 40 billion dollar round led by SoftBank in March. These deals incorporated specific conditions regarding investor equity contingent upon OpenAI successfully converting to a PBC. While failure to convert could allow investors to withdraw funds, insiders remain optimistic that stakeholders will stay committed, even if the transition takes longer than anticipated.
Even if Microsoft agrees to the new terms, OpenAI faces additional challenges. Regulatory approval is required in California and Delaware to ensure the restructuring aligns with its original public benefit mission. Delaware’s attorney general is reportedly reviewing the proposal to confirm the non profit entity retains meaningful oversight.
Furthermore, Elon Musk, an original co founder who departed OpenAI several years ago, has filed a lawsuit seeking to halt the restructuring. He argues the changes would improperly divert the benefits of AGI development away from the public towards OpenAI's financial backers.
If OpenAI's restructuring plan is ultimately blocked, it could severely hamper its ability to raise capital, pursue an IPO, and maintain its competitive edge against industry giants like Google.
