After months of back-and-forth negotiations, Microsoft and OpenAI have signed a new deal that gives Microsoft deep insight into OpenAI's models.

Redmond will retain a stake in OpenAI, while OpenAI will invest in the Azure cloud platform. In turn, Microsoft will support OpenAI's restructuring as a for-profit company and give up access to any AI if it achieves general intelligence (AGI).

For almost six months, Microsoft and OpenAI have been working to fine-tune their relationship moving forward. After investing approximately $13 billion in OpenAI during its early years, Microsoft held a profit-sharing agreement, but that needed to be renegotiated amid OpenAI's plans to build hundreds of billions of dollars' worth of AI data centers.

The two companies were particularly stuck on what to do if and when OpenAI developed a general intelligence AI equivalent to that of a human, otherwise known as AGI. Under the deal, Microsoft and OpenAI can develop AGI independently, but if and when that happens, their working partnership will effectively cease. Microsoft will have some rights over post-AGI models, but the AGI itself will remain separate. Microsoft will also allow OpenAI to develop AI devices with third parties, but if it uses the OpenAI API, it has to be run on Microsoft's Azure platform.

Microsoft also secured an ongoing 20% share of OpenAI's revenue, and a 27% stake in the company worth around $130 billion. OpenAI will also purchase $250 billion worth of Azure compute capacity in the coming years.

That is an enormous win for Microsoft, as it will continue to benefit from OpenAI's developments and research efforts, while also securing a substantial amount of equity and future revenue. OpenAI doesn't appear to get as much from the deal, but it is now untethered from Microsoft and can work with other cloud providers and companies, opening it up to new revenue streams.

OpenAI CEO Sam Altman used this opportunity to promise even more from OpenAI in the future, claiming OpenAI would one day deploy a gigawatt of AI compute power per week. Considering one gigawatt can cost upward of $40 billion to deploy, it's unclear how OpenAI would fund such a move. Even with its impending $500 billion IPO sometime next year, its new browser, and the recent PayPal deal that will bring commerce inside ChatGPT.

By: DocMemory
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