OpenAI and Microsoft sign non-binding agreement to transition into Public Benefit Corporation

OpenAI announced on Thursday that it has reached a non-binding agreement with Microsoft to restructure its for-profit arm into a Public Benefit Corporation (PBC), a move that could pave the way for the AI startup to raise new funding and eventually go public.

In a blog post, OpenAI Board Chairman Bret Taylor explained that under the new arrangement, OpenAI’s nonprofit parent will continue to exist and maintain control over the company’s operations. The nonprofit will also receive a stake in the new PBC valued at upwards of $100 billion. Further details of the deal were not disclosed.

“Microsoft and OpenAI have signed a non-binding memorandum of understanding (MOU) for the next phase of our partnership,” both companies said in a joint statement. “We are actively working to finalise contractual terms in a definitive agreement.”

If approved by regulators in California and Delaware, the transition could significantly increase OpenAI’s flexibility in raising capital while preserving nonprofit oversight. The governance model, however, remains unusual. It was the same structure that allowed the nonprofit board to briefly remove CEO Sam Altman in 2023, before he was reinstated days later following board resignations.

Under the current agreement, Microsoft enjoys preferred access to OpenAI’s technology and is its main cloud provider. But OpenAI has grown dramatically since Microsoft’s first investment in 2019, and has sought to diversify. In recent months, OpenAI has committed to a $300 billion cloud deal with Oracle starting in 2027 and partnered with SoftBank on its Stargate data centre project.

Negotiations between Microsoft and OpenAI have reportedly been tense. Microsoft was said to be interested in technology from Windsurf, an AI coding startup OpenAI attempted to acquire earlier this year, but the deal collapsed. Windsurf’s founders later joined Google, while its staff went to another AI firm, Cognition.

Adding further drama, Elon Musk, who has an ongoing lawsuit against OpenAI alleging it abandoned its nonprofit mission, submitted a $97 billion takeover bid earlier this year. The offer was rejected, but experts noted it may have influenced the valuation of the nonprofit’s new stake.

Critics, including nonprofits like Encode and The Midas Project, argue that the transition risks compromising OpenAI’s stated mission of ensuring artificial general intelligence benefits humanity. OpenAI has pushed back, claiming those groups are funded by rivals such as Musk and Meta CEO Mark Zuckerberg, an allegation both organisations deny.

Taylor confirmed that OpenAI and Microsoft will continue working with the California and Delaware Attorneys General on the transition, underscoring that regulatory approval is still required before the PBC model can take effect.

If the deal moves forward, OpenAI’s nonprofit stake in the PBC would surpass the value of Musk’s unsolicited bid, potentially reshaping the company’s trajectory in the rapidly evolving AI landscape.