Microsoft and OpenAI have a new deal that could clear the way for an IPO

As OpenAI attempts to restructure itself and eventually go public, a hurdle for the startup, recently valued at $500 billion, is its increasingly complicated partnership with Microsoft. On Thursday afternoon, the two companies released this joint statement about an agreement they’ve reached.

Microsoft & OpenAI:

Microsoft and OpenAI have signed a non-binding memorandum of understanding (MOU) for the next phase of our partnership. We are actively working to finalize contractual terms in a definitive agreement. Together, we remain focused on delivering the best AI tools for everyone, grounded in our shared commitment to safety.

Microsoft has invested $13 billion in OpenAI since 2019, and shares in the revenue earned by ChatGPT as well as its API. Microsoft also now includes OpenAI as a competitor, allows OpenAI to lean on other cloud providers for compute power, and has started to increase its reliance on its own AI models.

In a company town hall meeting on Thursday, Microsoft CEO Satya Nadella and AI chief Mustafa Suleyman committed to “significant investments” in its own models. “We should have the capacity to build world class frontier models in house of all sizes, but we should be very pragmatic and use other models where we need to,” said Suleyman.

There was one specific detail about the agreement with Microsoft released by OpenAI in another statement, saying that its nonprofit parent company will continue to hold authority over the for-profit business, with an equity stake worth more than $100 billion.

Other philanthropies and nonprofits have reportedly pushed back against OpenAI’s unusual restructuring plan, and the attorneys general of California and Delaware have opened investigations. In its announcement, OpenAI said, “We continue to work with the California and Delaware Attorneys General as an important part of strengthening our approach, and we remain committed to learning and acting with urgency to ensure our tools are helpful and safe for everyone, while advancing safety as an industry-wide priority.”