The deal removes a major constraint on ChatGPT maker OpenAI’s ability to raise capital and values the company at $500 billion.
Published October 28, 2025
Microsoft and OpenAI have reached an agreement that will allow the ChatGPT maker to value OpenAI at $500 billion and reorganize it as a public benefit corporation with more freedom to operate its business.
The deal, announced Tuesday, removes major constraints on OpenAI’s funding that have existed since 2019.
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At the time, the company had a deal with Microsoft that gave the tech giant rights to much of OpenAI’s work in exchange for the expensive cloud computing services it needed to run it. As the ChatGPT service exploded in popularity, these limitations were a source of significant tension between the two companies.
Microsoft will continue to own an approximately $135 billion (27%) stake in Open AI Group PBC, which is managed by the nonprofit Open AI Foundation, the companies said.
Redmond, Washington-based Microsoft has invested $13.8 billion in OpenAI, and Tuesday’s deal means the company has generated a return of nearly 10 times its investment.
Microsoft stock rose 2.5%, and its market value once again exceeded $4 trillion.
The deal will continue the relationship between the two companies until at least 2032, creating a large-scale cloud computing agreement in which Microsoft will retain some rights to OpenAI products and artificial intelligence (AI) models, even if OpenAI reaches artificial general intelligence (AGI), an AI system that will be on par with a fully educated adult.
simple corporate structure
With over 700 million weekly users as of September, ChatGPT has exploded in popularity since OpenAI was founded as a nonprofit AI safety group and has become the face of AI for many consumers.
As the company grew, the deal with Microsoft constrained OpenAI’s ability to raise funding and secure computing contracts from outside investors, as its computing needs skyrocketed due to an influx of ChatGPT users and research into new models.
“OpenAI has completed a recapitalization and simplified its corporate structure,” OpenAI Foundation Chairman Brett Taylor said in a blog post. “Nonprofits continue to manage for-profit organizations and now have direct access to key resources before AGI arrives.”
Microsoft’s pre-2019 contract contained many clauses based on when OpenAI reached that point, and the new contract requires an independent panel to review OpenAI’s claims to reach AGI.
“OpenAI still faces continued scrutiny regarding transparency, data usage, and safety oversight. But overall, this structure should provide a clearer path for innovation and accountability,” said Adam Sirhan, CEO of 50 Park Investments.
Gil Luria, head of technology research at DA Davidson, said the deal “resolves the long-standing issue of OpenAI being organized as a nonprofit and settles ownership of the technology with Microsoft. The new structure should provide a clearer investment path for OpenAI and make it easier to raise additional funding.”
Microsoft also said the ChatGPT maker has secured a deal with OpenAI to buy Microsoft Azure cloud computing services for $250 billion. In exchange, Microsoft will no longer have the right to preferentially refuse to provide computing services to OpenAI.
Microsoft also said it does not have any rights to the hardware made by OpenAI. In March, OpenAI acquired longtime Apple design chief Jony Ive’s startup io Products in a $6.5 billion deal.
