OpenAI is giving its long-time backer Microsoft Corp. a 27% ownership stake as part of a restructuring plan that took nearly a year to negotiate, removing a major uncertainty for both companies and clearing the path for the ChatGPT maker to become a for-profit business.

Under the revised pact, Microsoft will get a stake in OpenAI worth about $135 billion, the companies said in a statement Tuesday. In addition, Microsoft will have access to the artificial intelligence startup’s technology until 2032, including models that achieved the benchmark of artificial general intelligence (AGI), a more powerful form of AI that most say does not exist yet.

Microsoft will also continue to be entitled to receive 20% of OpenAI’s revenue, according to people familiar with the matter, who spoke on condition of anonymity as the information is not public. But as part of the new pact, OpenAI can pay more later. In a blog post, the companies said a revenue share agreement remains in effect until an expert panel verifies AGI.

With the agreement, OpenAI said its corporate restructure is now complete. The company had spent much of this year working to form a more traditional for-profit company, which is considered more attractive to investors. Microsoft, which backed OpenAI with some $13.75 billion, was the biggest holdout among the ChatGPT maker’s investors, Bloomberg News has reported.

“OpenAI has completed its recapitalization, simplifying its corporate structure,” said Bret Taylor, OpenAI’s chairman, in a statement. “The nonprofit remains in control of the for-profit, and now has a direct path to major resources before AGI arrives.”

The restructuring had been under review by the state attorneys general of Delaware and California. In a statement, Delaware State Attorney General Kathy Jennings said her office had decided not to object to the for-profit shift after a long review process in which she and her California counterpart, Rob Bonta, urged OpenAI to give the nonprofit more control over the new for-profit entity.

“This was a long and intensive negotiation—but I am pleased that OpenAI committed to a governance structure going forward that requires primacy for safety and security, and to utilize this technology and this corporation’s resources to benefit the public,” Jennings said in a statement.

Separately, Bonta said his office had also decided not to oppose the plan after securing “concessions that ensure charitable assets are used for their intended purpose, safety will be prioritized, as well as a commitment that OpenAI will remain right here in California.”

The new for-profit unit will be a public benefit corporation called OpenAI Group PBC. It will continue to be overseen by a nonprofit entity, now dubbed the OpenAI Foundation. The nonprofit will receive a 26% equity stake in the company after the restructure, as well as a warrant that allows it to receive an undisclosed amount of additional shares in the for-profit entity, if the latter’s share price grows more than tenfold after 15 years.

The foundation plans to use part of its equity stake, worth roughly $130 billion at OpenAI’s current $500 billion valuation, to focus on funding work to “accelerate health breakthroughs” and to work with organizations to address some severe risks from AI, such as displacing workers and creating bioweapons.

“Our hope is for the OpenAI Foundation to be the biggest nonprofit ever,” Sam Altman, OpenAI’s chief executive officer, said during a livestreamed event on Tuesday. “These are not the only things the nonprofit will fund, but we’re excited they’re the first two.”

Altman is not getting a stake in the newly restructured company, according to OpenAI.

Microsoft shares jumped as much as 4.2% on Tuesday to $553.72. Many on Wall Street had cited the changing OpenAI relationship as a serious point of uncertainty for the software maker.

Anurag Rana, an analyst at Bloomberg Intelligence, said that Microsoft keeping OpenAI’s intellectual-property rights for both products and models through 2032 “is the most important aspect” of the revised agreement. “Microsoft is using either OpenAI or Anthropic models in its Copilot products as it develops its own.”

Goldman Sachs and former Citigroup banker Michael Klein advised OpenAI on its restructuring effort, while Morgan Stanley advised Microsoft, according to people familiar with the matter.

One major sticking point in the monthslong negotiations between Microsoft and OpenAI had been what happened once OpenAI had achieved AGI, or AI that outperforms humans at most economically useful tasks. Under the new agreement, the threshold must be verified by an “independent expert panel.” Once achieved, Microsoft will no longer get a cut of OpenAI’s revenue.

During the livestreamed event, OpenAI chief scientist Jakub Pachocki said he expects that AI is “less than a decade away from superintelligence,” another buzzy term for hypothetical AI systems that surpass humans on many tasks. The company’s goal is to build an AI that can complete large research products autonomously by March 2028.

Microsoft is also losing its right of first refusal on new cloud infrastructure business from OpenAI. Azure had long been OpenAI’s exclusive provider, but Microsoft began allowing it to seek out services from other vendors like Oracle Corp. as long as it had an option to the business first. OpenAI will make an additional $250 billion commitment to Azure.

OpenAI’s restructuring plans had faced other complications, including a lawsuit filed by Elon Musk, an early backer who split with the company and accused the startup of defrauding investors about its commitment to its charitable mission. The lawsuit is ongoing.

Microsoft’s access to OpenAI’s technology will not include consumer hardware, the companies said. OpenAI will also have the ability to “jointly develop some products with third parties.”

For OpenAI, the restructuring also paves the way for a public offering. Altman said it’s not “top of mind” right now and there are no “specific plans” for when it might happen, but an IPO remains the most likely path for the company.

(With assistance from Dina Bass, Ryan Gould and Rachel Metz.)

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