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Microsoft, OpenAI Rewrite Partnership Rules Ahead of AGI Race

A $250 billion Azure deal, new governance guardrails, and a high-stakes restructuring put both firms on independent tracks toward Artificial General Intelligence.

• By John K. Waters
• 11/03/2025

Microsoft and OpenAI have formally revised their partnership as OpenAI completes its transition to a public benefit corporation (PBC), rebalancing control, financial incentives, and autonomy for both companies. Microsoft’s equity stake in OpenAI has dropped from 32.5% to approximately 27%, now valued at $135 billion.

The core agreement remains intact: Microsoft retains exclusive rights to OpenAI’s models and intellectual property, as well as Azure API access—at least until AGI is achieved. OpenAI continues as Microsoft’s partner for advanced AI capabilities. But the update introduces new boundaries and freedoms as both sides prepare for a capital-intensive future of AGI.

Verification and IP Rights Beyond AGI
Under the new terms, OpenAI can no longer unilaterally declare the achievement of AGI. Such a milestone must be verified by an independent expert panel. Microsoft’s IP rights have been extended through 2032 and will apply to models developed after AGI is reached, provided they meet mutually agreed-upon safety requirements. Access to OpenAI’s research methods remains in place until 2030 or the independent AGI verification—whichever comes first.

Both companies can now pursue AGI independently. Microsoft is permitted to develop its own AGI systems—either in-house or with new partners—as long as any use of OpenAI’s technology before AGI is declared meets substantially higher computational thresholds. OpenAI can now develop specific products with outside collaborators, though APIs remain exclusive to Azure.

$250 Billion Cloud Commitment and Strategic Flexibility
OpenAI has committed to purchasing an additional $250 billion in Azure services. However, Microsoft no longer holds the right of first refusal to serve as its exclusive compute provider. OpenAI also gains the right to:

• Offer API access to U.S. national security customers regardless of cloud infrastructure
• Release open-weight models that meet specific capability criteria
• Exclude consumer hardware from Microsoft’s IP protections

Revenue-sharing will continue until AGI is verified, though payments will now be spread across a longer timeframe.

A Restructure Built for Scale
On October 28, OpenAI finalized its conversion to a public benefit corporation. The restructuring created two distinct entities:

• OpenAI Foundation (nonprofit), which retains majority control
• OpenAI Group PBC (for-profit), the operational business

The Foundation holds a 26% stake in OpenAI Group, valued at approximately $130 billion. Current and former employees and investors own the remaining 74%. In addition, the Foundation holds a performance-based warrant: if OpenAI Group’s share price increases by more than 10x over the next 15 years, it will receive additional equity.

Initially, OpenAI considered allowing the nonprofit to cede control entirely. But following pressure from former employees, civic leaders, and state attorneys general, the company opted to retain the nonprofit’s oversight role. All current Foundation directors will serve on the for-profit’s board—except one, Dr. Zico Kolter, who will act as a non-voting observer. A second director will transition to the Foundation board within a year, also as a non-voting observer to the Group board.

Mission-Driven Capitalism
As a PBC, OpenAI Group is legally bound to balance profit with its stated mission: ensuring that AGI benefits humanity. This structure allows OpenAI to raise the capital needed to compete at scale while safeguarding its foundational purpose.

The OpenAI Foundation is committing an initial $25 billion toward initiatives in global health and AI resilience. It’s a demonstration of how the nonprofit intends to direct the economic returns of AGI development toward public benefit.

The revised agreement and corporate restructuring position OpenAI as a durable, capital-ready entity with reinforced mission governance—poised to remain competitive in the accelerating race toward general intelligence.