Microsoft makes its “situationship” with OpenAI official…

After months of jostling for power, Altman and Sundar finally buried the hatchet and signed a deal that resets the AI balance of power and puts the uncertainty on ice.

Under the new agreement, Microsoft will hold a 27% stake in OpenAI’s for-profit arm (now called OpenAI Group PBC) a move that values the ChatGPT maker at roughly $500 billion. The nonprofit “OpenAI Foundation” (yes, they renamed it again) will keep control with a 26% stake, and employees and early investors will own the rest. In exchange, OpenAI agreed to buy $250 billion worth of Microsoft Azure cloud services.

While Microsoft remains OpenAI’s biggest backer (with more than $13 billion invested since 2019) this new deal quietly ends some old privileges. Redmond no longer gets first dibs as OpenAI’s cloud provider, and its revenue-sharing deal ends the moment AGI (Artificial General Intelligence) is confirmed.

To make sure no one’s bluffing, a panel of independent experts will now have to verify OpenAI’s claim that it’s actually built an AI that can think like a human.

Microsoft still keeps rights to use OpenAI’s tech (excluding its rumored Jony Ive-designed consumer hardware) until 2032, including whatever models come after AGI is reached. In short: if ChatGPT wakes up one day and demands voting rights, Microsoft still gets to rent its brain for seven more years.

One notable addition is Microsoft can now pursue AGI on its own, even if that means racing against OpenAI… as long as it doesn’t use too much of OpenAI’s tech. Meanwhile, OpenAI can finally build with third parties beyond Microsoft, though any API products must still run on Azure. As for Non-API products… They're fair game. Translation: OpenAI can now flirt with Oracle, Google Cloud, or even Amazon… just not too seriously.

It’s easy to forget how much money is flowing between the two. Microsoft’s stock has surged thanks to OpenAI’s explosive growth, and OpenAI’s value ballooned largely because of Microsoft’s deep pockets and server racks.

Now, with this new deal, both are doubling down (literally) on each other. Microsoft gets long-term rights to use OpenAI’s AI smarts. OpenAI gets guaranteed access to one of the largest cloud infrastructures on Earth. It’s a symbiotic relationship: the brains meet the brawn. Or as one analyst put it, “OpenAI makes the magic… Microsoft sells the wand.”

The recapitalization makes OpenAI one of the most valuable private companies on the planet, sitting just behind SpaceX. Its nonprofit foundation will use its $130 billion stake to fund “AI resilience” and “health breakthroughs,” including an initial $25 billion philanthropic pledge… presumably to offset whatever havoc their code eventually causes.

For Microsoft, it’s another feather in its trillion-dollar cap. It now owns more than a quarter of the most influential AI company in the world… one that just so happens to run on its own cloud.

And with earnings right around the corner, the timing feels suspiciously perfect. It’s arguably the best PR warm-up Microsoft could ask for.

At the time of publishing this article, Stocks.News holds positions in Microsoft, Google, and Amazon as mentioned in the article.