Microsoft, OpenAI reach deal to lift fundraising limits

Microsoft and OpenAI have agreed to a new deal that removes restrictions on OpenAI’s ability to raise capital, allowing the ChatGPT maker to seek more external funding or potentially go public.

OpenAI, now restructured as a public benefit corporation controlled by a nonprofit, has operated under limitations since its 2019 agreement with Microsoft.

The new arrangement ends Microsoft’s exclusive rights to provide computing services to OpenAI, though the tech giant retains a 27% stake, and will continue to receive about 20% of OpenAI’s revenue for several years, according to sources.

Microsoft has invested US$13.8 billion in OpenAI and now holds a stake valued at roughly US$135 billion.

🔗 Source: Reuters

🧠 Food for thought

Implications, context, and why it matters.

Azure deal shapes OpenAI’s “freedom”

OpenAI can raise money and build non-application programming interface (API) products on non-Microsoft clouds, but it must buy $250 billion of Azure services (Azure is Microsoft’s cloud computing platform), which creates long-term dependence on Microsoft 1.
Non-Microsoft clouds are allowed only for non-API products; developer-facing API services stay Azure-only 1.
Microsoft can use OpenAI intellectual property (IP) through 2032, including models and products created after OpenAI says it achieved Artificial General Intelligence (AGI), subject to review by a third-party expert panel 1. Rights to OpenAI research end when AGI is confirmed or by 2030, whichever comes first; revenue sharing ends at AGI confirmation, and these research rights are separate from the IP-use rights 1.
Microsoft gives up right of first refusal (the option to match a third-party offer) and broader cloud exclusivity 1. In return, OpenAI accepts the $250 billion purchase commitment and keeps API exclusivity on Azure 1.

Vendors can compete for OpenAI’s buildout

The company reviewed bids from about 800 applicants 2. Roughly 20 sites sit in advanced review across the Southwest, Midwest, and Southeast 2. Plans call for a 17-gigawatt buildout with Oracle, Nvidia, and SoftBank 2.
The buildout includes battery-backed solar, gas turbine refurbishments, and small modular nuclear reactors 2. One account of OpenAI’s Request for Information (RFI) says the company proposed expanding the Advanced Manufacturing Investment Credit (a U.S. federal tax credit for domestic manufacturing) to cover grid components (equipment for electricity transmission and distribution) 3.