OpenAI seeks to unlock investment by ditching ‘AGI’ clause with Microsoft

OpenAI is reportedly considering removing a key clause in its partnership terms with Microsoft, a move that could pave the way for billions of dollars in additional funding. The clause currently prevents Microsoft from accessing OpenAI’s most advanced models if the start-up achieves “artificial general intelligence” (AGI). AGI is defined as a “highly autonomous system that outperforms humans at most economically valuable work,” with OpenAI’s board deciding when this milestone is reached.

The provision, originally designed to safeguard AGI from being commercially exploited, ensures ownership of such technology remains with OpenAI’s non-profit board. As stated on OpenAI’s website, “AGI is explicitly carved out of all commercial and IP licensing agreements.” However, sources familiar with the discussions say OpenAI is now exploring the removal of this clause, which would allow Microsoft to continue investing in and accessing its technology even after AGI is developed. No final decision has been made, as the board is still weighing its options.

Microsoft, which has invested over $13 billion in OpenAI, could see the current clause as a potential hindrance to future investment. Developing cutting-edge AI models is an expensive endeavor, and additional funding is crucial as OpenAI competes with deep-pocketed rivals like Google and Amazon.

Based in San Francisco and led by Sam Altman, OpenAI was recently valued at $150 billion and is transitioning into a public benefit corporation—a significant shift from its roots as a non-profit research lab. The restructuring process includes renegotiating terms with investors, including Microsoft, OpenAI’s largest shareholder.

“When we started, we didn’t anticipate becoming a product company or needing such vast amounts of capital,” Altman said at a New York Times conference. He added that OpenAI’s approach to AGI allows flexibility, treating it as a milestone rather than a definitive endpoint. Altman could also receive a direct equity stake in OpenAI for the first time as part of this transition.

OpenAI’s perspective on AGI has evolved, with many at the company now viewing it as a gradual process rather than a single achievement. The start-up began raising external capital in 2019, securing a $1 billion investment from Microsoft. At the time, OpenAI stated it would license “pre-AGI technologies” to cover development costs.

Investors were initially advised to view their funding as akin to a donation, given the uncertainty of how financial structures would function in a post-AGI world. However, OpenAI’s gradual shift towards a for-profit model has drawn criticism, including from Elon Musk, a co-founder and early backer. Musk, who now runs a rival AI start-up called xAI, has filed a lawsuit accusing OpenAI and Microsoft of deceptive practices, seeking to nullify their commercial partnership.

As part of the proposed restructuring, OpenAI plans to maintain an independent non-profit entity. This organization would hold a stake in the new public benefit corporation and potentially a trust. While the non-profit would continue to access OpenAI’s research and technology, its sole focus would remain on advancing OpenAI’s mission of benefiting humanity.

Bret Taylor, chair of OpenAI’s board, emphasized the board’s commitment to ensuring the company can achieve its mission of making AGI beneficial for all. He noted that any restructuring would ensure the non-profit thrives and retains value in the for-profit entity.

Neither OpenAI nor Microsoft commented on the specifics of the ongoing negotiations.