OpenAI said Tuesday it has finalized a major restructuring, solidifying its nonprofit foundation’s control over the company’s profit-driven operations.
The company explained that its nonprofit entity, now renamed the OpenAI Foundation, owns an equity stake valued at roughly $130 billion in its commercial arm. The for-profit division has also been reorganized as a public benefit corporation, now operating under the name OpenAI Group PBC.
Under the revised ownership model, the OpenAI Foundation will retain 26% of the company’s for-profit arm, while 47% will be owned by existing and former employees along with outside investors.
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Microsoft, which has invested over $13 billion in OpenAI since first partnering with the company in 2019, voiced its support for the new ownership structure. The tech giant’s stake in the public benefit corporation is now valued at about $135 billion, representing roughly 27% of OpenAI on an as-converted, diluted basis.
OpenAI noted that Microsoft’s earlier ownership stood at about 32.5% on an as-converted basis, not factoring in the company’s latest funding rounds. On Tuesday, Microsoft’s stock ended the day 1.98% higher.
“The more OpenAI succeeds as a company, the more the non-profit’s equity stake will be worth, which the non-profit will use to fund its philanthropic work,” OpenAI said in a blog post.
In 2024, OpenAI revealed plans to transition fully into a for-profit structure, a move that would have shifted authority away from its nonprofit arm and left it as a separate entity. However, following criticism from civic leaders and former employees, the company reversed course in May, confirming that the nonprofit foundation would continue to hold control.
On Tuesday, OpenAI said the OpenAI Foundation will initially commit $25 billion toward advancing health innovations and developing technologies that strengthen AI resilience.
As part of the same announcement, Microsoft confirmed that OpenAI has agreed to buy an additional $250 billion in Azure cloud services. However, Microsoft will no longer hold exclusive rights as OpenAI’s primary compute provider. Both companies also detailed a series of new adjustments to their ongoing partnership.
Reflecting on the partnership, Satya Nadella said both he and Bill Gates viewed Microsoft’s initial bet on OpenAI as a significant risk at the time. The company first invested $1 billion in 2019, less than four years after OpenAI’s founding, and has since expanded that commitment to more than $13 billion.
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However, Nadella admitted in an interview with TPBN, a tech-focused YouTube show, on Tuesday, that closing that first investment deal was anything but easy.
“Even at Microsoft, you kind of got to have to get a board approval to just go throw a billion dollars out there,” Nadella said. “But I must say it was not that hard to convince anyone that this is an important area and it’s going to be risky.”
“In retrospect, who would have thought? I didn’t put in a billion dollars saying, ‘Oh yeah, this is going to be a hundred bagger,’” he continued.
Nadella shared that when he first proposed investing in OpenAI in 2019, Bill Gates was initially skeptical about the idea, expressing caution over the potential risks and uncertainty surrounding the company’s future.
“Remember this was a nonprofit, and I think Bill even said, ‘Yeah, you’re going to burn this billion dollars’,” Nadella said.
“We kind of had a little bit of high risk tolerance, and we said we want to go and give this a shot,” he added, as quoted by Business Insider.