OpenAI and Microsoft Corp. have reportedly hired investment banks to help revise the terms of their partnership.
The Wall Street Journal today cited sources as saying that OpenAI is being advised by Goldman Sachs. Microsoft, in turn, has reportedly hired Morgan Stanley. The two banks previously participated in a deal that gave the ChatGPT developer access to a $4 billion revolving line of credit.
OpenAI launched in 2015 as a nonprofit research group. Four years later, it created a for-arm that now leads its artificial intelligence development efforts. As part of a record $6.6 billion funding round that it closed earlier this month, OpenAI reportedly plans to reincorporate the for-profit arm as a benefit corporation and remove caps that previously limited investors’ returns.
The newly reported negotiations with Microsoft are said to focus on how big of a stake the tech giant will receive in OpenAI following the restructuring.
Since 2019, Microsoft has invested more than $13 billion in the ChatGPT developer. According to the Journal, the current terms of their partnership specify that the tech giant will receive most of OpenAI’s initial profits until it recoups its investment. Microsoft will subsequently be given a 49% stake in the company.
Besides the size of Microsoft’s stake in OpenAI, the negotiations reportedly focus on what governance rights it will receive. That raises the possibility the tech giant may once again seek a board seat. Microsoft received an observer seat last November, but gave it up this past July in a move seen as an attempt to stave off regulatory scrutiny.
OpenAI’s new negotiations with Microsoft may cover other topics as well. A day before the Journal report, the New York Times revealed that the ChatGPT developer had repeatedly tried to revise its agreement with Microsoft over the past year.
As part of the effort, OpenAI reportedly secured a contractual exception that will allow it to purchase up to $10 billion worth of cloud infrastructure from Oracle Corp. More recently, the AI provider reportedly convinced Microsoft to charge less for access to its Azure cloud platform.
OpenAI reportedly expects to lose about $5 billion on $3.7 billion in revenue this year. Reducing cloud costs, which likely account for a significant portion of the company’s losses, could help it move close towards profitability. OpenAI reportedly expects to become profitable by 2029 and grow its annual revenue to $100 billion during that time frame.
OpenAI Chief Executive Officer Sam Altman said in a statement that “we’re deeply grateful for our partnership with Microsoft; the early big bet they took on us and the vast compute resources they’ve provided have been essential to our research breakthroughs, benefiting both companies greatly.”