OpenAI’s decision on Monday to scrap a planned separation of its commercial arm and instead keep it under the control of its founding nonprofit board introduces new complexities into its defining relationship with key partner Microsoft.
While OpenAI confirmed its operating unit will still convert to a Public Benefit Corporation (PBC) – a structure allowing a dual focus on mission and profit, similar to competitor Anthropic, and notably removing the prior “capped-profit” limit on investor returns – the retention of nonprofit oversight marks a significant shift from its late 2024 strategy.
Crucially, Microsoft, which has committed $13 billion to OpenAI, has reportedly not yet formally approved this revised structure and remains in active negotiations, according to Bloomberg, citing sources familiar with the private deliberations.
The software giant’s position is central, given its deep financial and operational ties to OpenAI. Beyond its multi-billion dollar investment, Microsoft has unique licensing and revenue-sharing agreements and secured a Right of First Refusal (ROFR) ensuring OpenAI prioritizes Azure compute unless Microsoft cannot meet its needs.
Protecting these arrangements is reportedly a key focus of the ongoing discussions. The previous plan for an independent for-profit entity had already presented challenges, including reported difficulties in determining Microsoft’s equity stake under that framework. Now, with the nonprofit retaining ultimate control – including the power to appoint the PBC’s board – the governance dynamics Microsoft must navigate have changed yet again.
Negotiations Amid Evolving Strategies
These negotiations occur against a backdrop of shifting strategies for both companies. OpenAI has been actively seeking to diversify its access to the immense computing power needed for large AI models, evidenced by its $11.9 billion deal with cloud provider CoreWeave in March.
That deal notably came after Microsoft itself passed on a $12 billion option with CoreWeave, reflecting Redmond’s own push towards developing in-house AI chips like Azure Maia and Cobalt (its custom silicon designed for Azure workloads) and reducing reliance on third-party infrastructure. Microsoft is simultaneously pouring about $80 billion into its own Azure AI infrastructure in 2025, ensuring its competitiveness regardless of OpenAI’s compute choices.
The restructuring itself was driven partly by immense financial pressures – OpenAI faced a projected $5 billion loss in 2024 – and the need to satisfy conditions tied to major funding rounds, like the recent SoftBank investment. While OpenAI states the new plan meets these investor requirements, the ultimate structure still requires sign-off from Microsoft and review by state Attorneys General in California and Delaware, who oversee nonprofit conversions.
External Pressures and Legal Entanglements
OpenAI’s reversal followed considerable external pressure. Concerns were raised by former employees and AI researchers, as well as a coalition of California nonprofits, about safeguarding the company’s original mission under a more independent for-profit model.
OpenAI Board Chair Bret Taylor explicitly linked the reversal to these pressures in the company’s announcement, saying the decision came “after hearing from civic leaders and engaging in constructive dialogue with the offices of the Attorney General of Delaware and the Attorney General of California.”
The complex relationship with Microsoft is also a focal point in Elon Musk’s ongoing lawsuit against OpenAI. Musk, a co-founder, alleges the company betrayed its founding mission partly for Microsoft’s benefit.
Following OpenAI’s May 5th announcement, Musk’s lead counsel, Marc Toberoff, told Bloomberg the revised plan “changes nothing,” calling it a “transparent dodge” and stating, “charitable assets have been and still will be transferred for the benefit of private persons, including Altman, his investors and Microsoft.”
An OpenAI spokesperson reiterated the company view that “Elon continuing with his baseless lawsuit only proves that it was always a bad-faith attempt to slow us down.” This follows OpenAI’s rejection of Musk’s $97.4 billion takeover bid in February and its countersuit filed in April.
The Path Forward for the Partnership
Despite the ongoing negotiations and external challenges, OpenAI publicly maintains a positive outlook on its relationship with Microsoft. In its statement announcing the restructuring, the company noted it looks forward to finalizing details “in continued conversation with them [AG offices], Microsoft, and our newly appointed nonprofit commissioners.”
How the final details are ironed out, particularly regarding Microsoft’s stake, influence, and the operational realities of the Azure partnership under continued nonprofit governance, will be closely watched. The conversion to a PBC, while keeping the nonprofit board in charge, aims to provide a structure that satisfies both mission-driven concerns and the financial requirements of partners like Microsoft and SoftBank, though final approval from Redmond remains pending.
