Microsoft and OpenAI Announce Landmark Deal
On October 28, 2025, Microsoft and OpenAI revealed a transformative agreement that restructures OpenAI into a public benefit corporation (PBC), valuing the AI leader at an staggering $500 billion. This move grants OpenAI greater autonomy in its operations and fundraising, while preserving a deep partnership with Microsoft.Key Details of the Deal
- Restructuring and Ownership: OpenAI will transition from its previous capped-profit model to a PBC called OpenAI Group PBC, controlled by the nonprofit OpenAI Foundation. Microsoft retains a 27% stake valued at approximately $135 billion, reflecting a nearly 10x return on its $13.8 billion in prior investments. The OpenAI Foundation holds a 26% stake worth about $130 billion, with potential for growth tied to future valuation milestones.
- Cloud Commitment: OpenAI has agreed to purchase $250 billion in Azure cloud services from Microsoft through 2032, ensuring continued reliance on Microsoft's infrastructure while ending Microsoft's right of first refusal for OpenAI's compute needs. This allows OpenAI to explore other providers if desired.
- Hardware Independence: Microsoft waives any rights to OpenAI's hardware developments. Notably, OpenAI acquired Jony Ive's (former Apple design chief) startup, io Products, for $6.5 billion in March 2025, signaling ambitions in AI hardware.
- AGI Safeguards: Unlike the 2019 agreement, claims of achieving Artificial General Intelligence (AGI) will now require verification by an independent panel, balancing innovation with oversight.
Broader Implications
This deal resolves long-standing tensions from the 2019 partnership, where Microsoft's investments came with strings attached to OpenAI's IP and operations. As ChatGPT's popularity surged, these constraints hindered OpenAI's ability to raise capital and scale. The restructuring paves the way for a potential future IPO and positions OpenAI to compete more aggressively in the AI race, while funneling profits back into public-benefit initiatives like disease cures and AGI risk mitigation.Wall Street views it positively: Analysts note it clarifies the partnership, boosts OpenAI's path to profitability (despite $13.5 billion losses on $4.3 billion revenue in H1 2025), and underscores AI's massive capital demands. Microsoft's stake exemplifies the sector's "extreme concentration of money," where strategic alliances trump traditional valuations.
This $500 billion valuation cements OpenAI's dominance in generative AI, but it also highlights the high-stakes ecosystem where giants like Microsoft bet billions on frontier tech. For more, check the official announcements from Microsoft or OpenAI.
Microsoft, OpenAI reach new deal valuing OpenAI at $500 billion
Microsoft and OpenAI reached a deal to allow the ChatGPT maker to restructure itself into a public benefit corporation, valuing OpenAI at $500 billion and giving it more freedom in its business operations.
www.reuters.com