Microsoft holds a significant leverage that could potentially block OpenAI‘s ambitious plan to restructure itself into an independent for-profit company, a recent report has said, sugegsting that this may have significant financial repercussions for the Sam Altman-led artificial intelligence (AI) company. Moreover, Microsoft’s position in this matter could strengthen Elon Musk’s ongoing efforts to block this very transition by the ChatGPT maker – a move Musk has been actively attempting to prevent for an extended period, citing concerns over its deviation from original non-profit principles and potential risks associated with its close ties to a major corporation.
Citing sources familiar with the situation, a report by The Wall Street Journal has claimed that as both the companies prepare for independent futures, they hold “tremendous power over one another at a critical moment in the global AI race.”
While “Microsoft can effectively block OpenAI’s effort to restructure into an independent for-profit company” that may end up in OpenAI losing tens of billions of dollars, “OpenAI’s board can trigger a clause in its contract that prevents Microsoft from accessing its most cutting-edge technology”.
Notably, Microsoft hasn’t to date threatened to do so but OpenAI officials have raised the possibility of doing so over the past year, the report claims.
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How Microsoft may block OpenAI’s for-profit transition
Microsoft, being OpenAI’s largest shareholder, holds veto power, a report said, adding that the tech giant’s approval is mandatory for OpenAI’s transition. Indications suggest this consent will not come easily. Therefore, Microsoft’s refusal to give its approval is the mechanism by which it can effectively block the restructuring.
This development casts a shadow over OpenAI’s ongoing efforts to secure a massive $40 billion funding round, a significant portion of which hinges on the successful completion of this restructuring by the end of the year.
The details of the funding deal reportedly suggest a high-stakes scenario for the ChatGPT maker. Led by a potential $30 billion contribution from SoftBank, with Microsoft and other investors expected to fill the remaining portion, the $40 billion injection depends upon OpenAI successfully converting to a for-profit entity within the current year.
Failure to meet this condition would allow SoftBank to slash its investment to a mere $10 billion, effectively halving the total funding to $20 billion. It is to be noted that OpenAI must become a for-profit organisation to continue raising the billions of dollars to fund its operations, a previous report said.
Meanwhile, investors have reportedly deduced from “the blip” episode where Sam Altman was briefly removed as chief executive in late 2023 and then reinstated that “the unconventional nonprofit structure carried too many risks.”
