OpenAI and Microsoft are engaged in negotiations to redefine their multi-billion dollar partnership, a critical maneuver designed to pave the way for the ChatGPT maker’s future Initial Public Offering (IPO) while ensuring the software giant maintains long-term access to cutting-edge artificial intelligence.
The high-stakes discussions, detailed in a report by the Financial Times, center on OpenAI’s corporate restructuring into a Public Benefit Corporation (PBC), a move seen as vital for attracting the colossal investment required for its ambitious AI development, including the pursuit of Artificial General Intelligence (AGI).
Recasting A Crucial Alliance
This restructuring and the associated talks with Microsoft, OpenAI’s largest financial backer with over $13 billion invested to date, are fundamental for the $260 billion startup’s next growth phase.
The outcome will significantly shape OpenAI’s ability to balance its original non-profit mission to “benefit humanity” with the escalating commercial realities and immense capital demands of leading the AI revolution. For Microsoft, securing access to OpenAI’s future models beyond their current 2030 contractual agreement is paramount, even as it develops its own AI capabilities.
The negotiations come as OpenAI, on May 5th, reversed an earlier decision and announced its founding non-profit entity will maintain ultimate oversight, even as its commercial arm converts to a PBC. This structural shift, which followed considerable external pressure, aims to satisfy both mission-driven concerns and the financial requirements of major investors, though Microsoft had reportedly not formally approved this revised structure as of May 6th.
At the heart of the deliberations is the equity Microsoft will receive in the restructured OpenAI and the terms of their broader contract, first established in 2019. Sources indicate Microsoft is considering relinquishing some of its equity stake in OpenAI’s new for-profit entity in exchange for guaranteed access to new AI technologies developed after the current 2030 cut-off. This concession is critical for OpenAI, as one person close to the company stated that the PBC structure is a key investor demand ensuring an “IPO becomes possible”.
A Cooling Relationship
The relationship between the two tech giants, while still collaborative, has reportedly cooled. OpenAI’s expanding ambitions, including targeting enterprise customers with its own AI products and seeking diverse partners like SoftBank and Oracle for its massive “Stargate” computing infrastructure project, have introduced competitive friction.
A senior Microsoft employee candidly described the tension, noting OpenAI’s approach: “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.”. The employee added, “To be honest, that is a bad partner attitude, it shows arrogance.” Despite these strains, a source close to OpenAI expressed confidence: “Microsoft still wants [this conversion] to succeed. It’s not like it’s all gone to hell and it’s open warfare. There’s a tough negotiation but we’re confident we’ll get it done.”.
OpenAI’s Path To Public Benefit And Profit
OpenAI’s journey from a non-profit research lab founded in 2015 to a commercial powerhouse has been rapid. The 2019 launch of a for-profit subsidiary, initially telling investors to view funding “in the spirit of a donation”, has evolved dramatically. Massive funding rounds in late 2024 and early 2025, including $6.6 billion in October 2024 and a further $40 billion led by SoftBank in March 2025, underscore the capital-intensive nature of its work. An individual close to OpenAI highlighted the financial imperative, stating that “$40bn under a capped profit structure is not achievable.”.
The decision to become a PBC, a model also adopted by rivals like Anthropic and Elon Musk’s xAI, is a “high level recognition of what’s required to raise this amount of money,” according to the same source. However, this shift away from its purely non-profit origins has not been without criticism.
Navigating Scrutiny And Strategic Imperatives
Elon Musk, an OpenAI co-founder who has since become a vocal critic, continues his legal efforts to halt any corporate restructuring. His attorney, Marc Toberoff, asserted that “The charity is still turning over its assets and technology to private persons for private gain — including Sam Altman — while moving all of the charity’s actual work on AI/AGI into a giant for-profit corporation.”
Following OpenAI’s May 5th restructuring announcement, Toberoff, as reported by Bloomberg, said the revised plan “changes nothing,”, calling it a “transparent dodge.” An OpenAI spokesperson characterized Musk’s ongoing lawsuit as a “Elon continuing with his baseless lawsuit only proves that it was always a bad-faith attempt to slow us down,” according to Axios.
Former OpenAI employee Page Hedley also voiced concerns, warning about “the potential for extraordinary wealth and power from artificial general intelligence [to] be reallocated from the public to OpenAI’s investors.”
Regulatory bodies are also watchful. Delaware’s Attorney-General Kathy Jennings confirmed her office would review OpenAI’s new plan “for compliance with Delaware law by ensuring that it accords with OpenAI’s charitable purpose and that the non-profit entity retains appropriate control over the for-profit entity.”
This complex environment underscores the challenges highlighted by Columbia Law School professor Dorothy Lund: “When you’re a mission driven company which needs money from investors, you are in a dangerous position.” She added, “You have to walk this line: you want your investors to keep giving you huge billion dollar cheques, so you need to keep them happy.”.
Against this backdrop, both companies are making significant moves in AI infrastructure. Microsoft itself passed on a $12 billion option with cloud provider CoreWeave. OpenAI subsequently secured that capacity through an $11.9 billion deal with CoreWeave. This aligns with Microsoft’s strategy to invest heavily in its own Azure AI infrastructure, committing around $80 billion in 2025, and developing in-house AI chips like Azure Maia and Cobalt.
OpenAI, meanwhile, is also expanding, evidenced by its reported $3 billion agreement to acquire AI coding assistant startup Windsurf, its largest acquisition yet.
