OpenAI’s controversial for-profit restructuring is finally complete, along with a new deal with Microsoft that covers its upcoming plans for consumer hardware and what the next steps will be if AGI (Artificial General Intelligence) is ever achieved.
The for-profit arm of the company is now a public benefit corporation, called OpenAI Group PBC. The non-profit is now called the OpenAI Foundation and “currently holds equity in the for-profit valued at approximately $130 billion” – it will start with a $25 billion focus on health care and disease and “AI resilience,” according to OpenAI. blog postThe nonprofit will also receive “additional ownership” once OpenAI reaches unspecified valuation milestones.
The news comes after more than a year of OpenAI’s negotiations with the attorneys general’s offices of California and Delaware – had they not ultimately blessed the restructuring, OpenAI would not have been able to move forward. It also follows a thorny and lengthy legal battle with Elon Musk, who is suing both the company and CEO Sam Altman in efforts to stop the conversion. Musk co-founded OpenAI in 2015 as a non-profit research laboratory.
In recent months, the company changed its original plan – a for-profit conversion where the nonprofit would not control any aspects of the rest of the company – into an adjusted plan, under which OpenAI’s nonprofit parent would own up to $100 billion of equity and retain oversight of the company.
One question that has sparked controversy over the past year, and still has not been fully answered, is whether OpenAI’s nonprofit will retain control over its underlying technology, including the possible future development of artificial general intelligence, or AGI – systems that equal or exceed human cognitive ability. AGI is the moving goalpost that OpenAI and almost all competitors are chasing, pouring financial resources and headcount into its development.
As part of the restructuring, OpenAI struck a brand new deal with Microsoft, meaning the tech giant is reducing its ownership stake — previously, OpenAI had a 32.5 percent stake in it on an as-converted basis, and now, the new public benefit corporation owns about 27 percent (“on an as-converted diluted basis, including all owners”), a stake that’s worth about $135. Billion.
Here’s what else changed as part of the OpenAI-Microsoft deal: Microsoft has finally resolved one of the biggest reported sticking points in its relationship with OpenAI — the fact that Microsoft would, in the past, lose its rights to OpenAI’s technology once the company got access to its AGI. The “AGI Clause”, as it came to be known, was somewhat vague, and the new deal between the two companies has clarified things considerably.
For one, “Once an AGI is announced by OpenAI, that announcement will now be verified by an independent expert panel” – according to Microsoft, it won’t be OpenAI alone making the call. blog postAnd now, Microsoft doesn’t even lose the rights to the technology: According to the Post, “Microsoft’s IP rights for both models and products have been extended through 2032 and now also include later AGI models with appropriate security guardrails.”
But Microsoft’s rights are limited in other ways. Its IP rights for OpenAI’s research will last only until 2030 or when the expert panel verifies that AGI has been reached, “whichever occurs first”. IP rights allow Microsoft access to “confidential methods used in the development of models and systems” and include models designed only for internal use or research purposes. Their earlier revenue-share agreement will remain in place until the AGI is verified through an expert panel, but payments “will be made over the long term,” according to the Post.
But – and this is new – Microsoft’s IP rights no longer cover OpenAI’s consumer hardware, meaning the secret behind the device it’s building with famed Apple designer Jony Ive is unclear.
Microsoft and OpenAI have also loosened the previously exclusive nature of their partnership. OpenAI can now cooperate with third parties to develop certain products and release certain open weight models, and Microsoft will no longer have the right of first refusal to become OpenAI’s compute provider. OpenAI is also under contract to buy an “incremental” $250 billion worth of Azure services.
Microsoft can now “advance AGI independently, either alone or in partnership with third parties” – meaning the AGI arms race is now greater than ever. And let’s say Microsoft uses OpenAI’s IP to develop AGI – so, “Before AGI is announced, models will be subject to computation limits.” Again, the AGI race is heating up, especially between the two companies.
If OpenAI had not announced a complete restructuring by New Year’s Eve this year, it may have suffered losses up to $10 billion Its previously announced SoftBank investment.
The company will host a livestream question and answer With Altman and Jakub Pachocki, Chief Scientist at OpenAI, at 1:30 pm ET.
