OpenAI negotiates with Microsoft to unlock new funding and future IPO. - Reuters

OpenAI negotiates with Microsoft to unlock new funding and future IPO. - Reuters

OpenAI, the renowned AI startup, is reportedly in talks with Microsoft to restructure its deal and potentially pursue an initial public offering (IPO) in the future. The negotiations come as OpenAI aims to transition from a non-profit to a for-profit entity, which could unlock new funding opportunities and pave the way for an IPO.

Microsoft, OpenAI's largest backer with an investment of over $13 billion, is a key holdout in these efforts. The original contract signed in 2019, set to expire in 2030, includes terms for intellectual property (IP) access, product rights, and revenue sharing. OpenAI is now seeking to revise these terms to allow for a for-profit structure and an IPO, while ensuring Microsoft continues to have access to OpenAI's cutting-edge AI technology beyond 2030 [1].

One of the critical issues in the negotiations is how much equity Microsoft will hold in the restructured OpenAI. Microsoft may surrender some equity in exchange for continued access to OpenAI’s tech beyond 2030, according to reports [1]. Additionally, OpenAI has reportedly informed investors that it plans to cut the revenue it shares with Microsoft by at least half by 2030, reducing Microsoft's current 20% share to just 10% [2]. This development could potentially put their partnership in jeopardy.

Despite these negotiations, Microsoft's stock remains bullish, with analysts suggesting a strong chance of continued outperformance. Microsoft (MSFT) stock is trading near the top of its 52-week range and above its 200-day simple moving average. Out of 63 analysts surveyed by CNN, 92% suggest buying the stock now, while the remaining 8% advise holding. CNN's analysts project a median price projection of $500.00 over the next 12 months, a 14.75% ROI from current prices, with potential to rise as high as $650 [2].

References:
[1] https://m.economictimes.com/tech/artificial-intelligence/openai-in-talks-with-microsoft-for-new-funding-future-ipo-ft-report/articleshow/121079968.cms
[2] https://watcher.guru/news/microsoft-msft-and-openai-cut-revenue-sharing-partnership-in-trouble