WASHINGTON, Oct 28 (Reuters) – Microsoft and OpenAI have finalized a landmark restructuring agreement that transforms the ChatGPT developer into a public benefit corporation (PBC) valued at $500 billion — a move that gives OpenAI greater independence while maintaining deep operational ties with Microsoft.
The deal, announced jointly by both companies on Tuesday, marks one of the largest corporate valuations in the tech industry and redefines the governance model of one of artificial intelligence’s most influential players.
OpenAI gains new autonomy under public benefit structure
Under the new framework, OpenAI will operate as OpenAI Group PBC, a structure designed to balance commercial growth with its stated mission of ensuring artificial intelligence benefits humanity. The reorganization effectively removes long-standing restrictions on OpenAI’s fundraising and business operations that were imposed under its 2019 agreement with Microsoft.
That earlier deal gave Microsoft extensive rights to OpenAI’s technology in exchange for billions of dollars in cloud computing services — a partnership that fueled OpenAI’s rapid expansion but limited its ability to attract new investors.
“The nonprofit remains in control of the for-profit, and now has a direct path to major resources before AGI arrives,” said Bret Taylor, board chair of the OpenAI Foundation, in a blog post announcing the restructuring.
Microsoft retains major stake and cloud partnership
Despite the restructuring, Microsoft will retain a 27 percent equity stake in the new OpenAI Group PBC, valued at about $135 billion. The software giant, which has invested $13.8 billion in OpenAI to date, now stands to gain nearly a tenfold return on its original investment.
The two firms also extended their partnership through 2032, including a massive $250 billion cloud services agreement under which OpenAI will purchase Azure computing resources. In exchange, Microsoft will give up its “first refusal” rights for future computing deals — granting OpenAI the flexibility to engage with other vendors.
Microsoft’s shares rose 2.5 percent following the announcement, pushing its market capitalization back above the $4 trillion mark.
No equity for Altman, no IPO plans
OpenAI CEO Sam Altman will not receive equity in the restructured company, reversing earlier discussions that considered offering him shares. The company also confirmed that it has no immediate plans for an initial public offering.
Altman, who has led OpenAI through a period of explosive growth driven by ChatGPT’s popularity, said the PBC structure ensures that the company’s development remains aligned with its long-term mission while providing financial flexibility.
OpenAI currently serves more than 700 million weekly users, cementing its position as the world’s most widely recognized AI platform.
Addressing governance, safety, and AGI oversight
The deal includes new governance mechanisms to address one of the most debated questions in AI — how to verify the arrival of artificial general intelligence (AGI). An independent panel will now be responsible for confirming OpenAI’s claims if and when it achieves AGI, a milestone defined as human-level cognitive performance in machines.
Analysts say the new structure aims to strike a balance between innovation, accountability, and safety.
“OpenAI still faces scrutiny around transparency and data governance,” said Adam Sarhan, CEO of 50 Park Investments. “But this structure provides a clearer path forward for innovation and oversight.”
Gil Luria, head of technology research at DA Davidson, said the deal resolves a long-standing tension in OpenAI’s structure. “It clarifies the ownership rights between OpenAI and Microsoft, paving the way for future fundraising and collaboration,” he added.
Expanding horizons beyond AI software
In addition to its AI research, OpenAI continues to broaden its technological footprint. Earlier this year, the company acquired io Products — the startup founded by former Apple design chief Jony Ive — in a $6.5 billion deal. The acquisition is seen as a step toward integrating AI with next-generation consumer hardware.
Microsoft clarified that it will not hold any rights to hardware produced by OpenAI under the new arrangement.
As OpenAI transitions into its new phase, the restructured partnership with Microsoft is expected to redefine the dynamics of the global AI industry — balancing commercial momentum with public accountability in the race toward advanced artificial intelligence.
This news was originally published by Reuters.