TLDR
- OpenAI must restructure into a public benefit corporation by year-end or lose $20 billion from a $40 billion SoftBank-led funding round
- Microsoft holds major leverage in negotiations due to its $10 billion investment and exclusive access to OpenAI’s technology through 2030
- The two companies are clashing over equity stakes, with OpenAI seeking to limit Microsoft’s access to its new Windsurf AI coding tool acquisition
- OpenAI is considering asking antitrust regulators to investigate Microsoft if talks continue to stall
- Microsoft has already modified some terms, giving up exclusivity for OpenAI’s cloud services after the Project Stargate announcement
OpenAI faces a critical deadline to restructure its business model by the end of 2025, with $20 billion in funding hanging in the balance. The AI company must convert its for-profit arm into a public benefit corporation to secure half of a $40 billion investment round led by SoftBank.
The restructuring plans have hit a major obstacle in the form of Microsoft, OpenAI’s biggest investor and closest partner. Microsoft invested $10 billion in OpenAI in 2023, adding to earlier investments in 2019 and 2021, giving the tech giant substantial equity stakes and exclusive access to OpenAI’s technology.
OpenAI's partnership with Microsoft may turn sour, as executives at OpenAI have reportedly considered accusing Microsoft of anticompetitive behavior, according to the Wall Street Journal. Read report: https://t.co/ZyKDo3v9R0 pic.twitter.com/LJsEVO3Odu
— Reuters Tech News (@ReutersTech) June 17, 2025
The original partnership began in 2019 when Microsoft saw potential in the nonprofit AI lab. At that time, artificial intelligence was still largely in the research phase, with Google’s AlphaGo being the most advanced AI system available. Microsoft’s initial $1 billion investment helped fuel the development of ChatGPT, which launched in November 2022.
The relationship was initially symbiotic, with OpenAI running all its computing on Microsoft’s Azure cloud platform. Microsoft gained access to OpenAI’s intellectual property and models, which it integrated into its Copilot products. This partnership helped Microsoft’s Intelligent Cloud segment generate $105 billion of the company’s $245 billion total revenue in fiscal 2024.
Growing Tensions Over Control
However, the partnership has become increasingly strained as both companies pursue different strategic goals. OpenAI wants to break free from what it considers restrictive terms in the Microsoft deal, while Microsoft has grown concerned about its dependence on OpenAI as both a major customer and supplier.
The tensions became public in February 2024 when Microsoft President Brad Smith described OpenAI as “a new competitor in the technology industry.” Microsoft began developing its own AI models and declined to participate in OpenAI’s $6.6 billion funding round in October 2024.
The relationship shifted further in January 2025 when OpenAI announced Project Stargate alongside President Donald Trump, Oracle Chairman Larry Ellison, and SoftBank CEO Masa Son. This $500 billion data center project marked OpenAI’s move beyond its Microsoft dependence.
Microsoft has already made some concessions, giving up exclusivity for OpenAI’s cloud services after the Stargate announcement. The company now holds right-of-first-refusal for OpenAI’s cloud business as the AI company expands its infrastructure partnerships with CoreWeave and Google Cloud.
Key Sticking Points
The current negotiations center on several major issues. The primary dispute involves how much equity Microsoft will retain in OpenAI’s restructured business. Microsoft has reportedly offered to reduce its equity stake in exchange for continued access to future OpenAI technology.
Another major point of contention is OpenAI’s recent $3 billion acquisition of Windsurf, an AI coding tool. Under current agreements, Microsoft has access to all OpenAI intellectual property, which would include Windsurf. OpenAI wants to block this access because Microsoft operates its own competing coding assistant, GitHub Copilot.
Regulatory and Legal Challenges
OpenAI’s restructuring faces additional hurdles beyond the Microsoft negotiations. The company must navigate regulatory approvals from California, Delaware, and federal authorities. It also faces a lawsuit from co-founder Elon Musk seeking to block the conversion to for-profit status.
The legal challenges stem from OpenAI’s original 2015 founding as a nonprofit with a mission to “advance digital intelligence in a way that is most likely to benefit humanity.” Converting to for-profit status requires the nonprofit to receive fair market value for its assets, estimated at $300 billion in the latest funding round.
According to The Wall Street Journal, negotiations have become contentious enough that OpenAI is considering asking antitrust regulators to investigate potential competition issues in its Microsoft agreement. The Financial Times reported that Microsoft is prepared to walk away from discussions entirely.
Both companies issued a joint statement saying they have “a long-term, productive partnership that has delivered amazing AI tools for everyone” and that “talks are ongoing and we are optimistic we will continue to build together for years to come.”
The clock continues ticking toward the year-end deadline, with OpenAI’s $20 billion funding contingent on successfully completing the restructuring process and resolving the Microsoft partnership terms.
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