Microsoft Deal Rewrite Could Save OpenAI $50 Billion Amid Record AI Data Center Spend 

The Information recently reported that ChatGPT-maker OpenAI has informed shareholders that it expects to reduce the percentage of revenue paid to Microsoft from about 20% today to just 8% by 2030. The shift could save the chatbot startup tens of billions of dollars over the next half-decade as it struggles with soaring compute costs and an accelerating buildout of data centers.

Under the proposed terms being discussed in an amended OpenAI–Microsoft collaboration deal, the outlet reports a potential seismic shift in how much OpenAI will pay Microsoft. This change could help offset record-breaking computing costs and save the startup $50 billion:

As part of their original partnership agreement, Microsoft is entitled to 20% of the startup’s revenue through 2030. But OpenAI has projected to share roughly 8% of its revenue with commercial partners—namely, Microsoft—by the end of the decade from just under 20% this year. The difference between those figures adds up to over $50 billion in additional revenue OpenAI would keep for itself through 2030, which it needs because it has projected record-breaking expenses for computing power before that year.

The companies are also negotiating what will happen when OpenAI achieves so-called artificial general intelligence, or AI that’s as intelligent as a human. The companies’ existing contract stipulates that Microsoft will lose exclusive access to OpenAI’s technology once the startup demonstrates that its technology can surpass certain financial milestones, but Microsoft has been angling for the AGI clause to be modified or removed from the contract.

The two companies are also negotiating how much OpenAI will spend to rent servers from Microsoft, according to another person briefed on the discussions.

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It’s not clear why OpenAI is projecting sharing less than 20% of its revenue with Microsoft, given the earlier terms, but some OpenAI leaders want Microsoft to exempt future OpenAI products that haven’t been released yet from the existing revenue-sharing agreement, such as PhD-level agents that cost $20,000 a month.

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While many aspects of the deal are still up in the air, some aspects of the agreement have been largely worked out, say people close to the discussions. Namely, OpenAI’s nonprofit and Microsoft will each get around one-third of the new company, which is currently allowing its employees to sell shares at a $500 billion valuation, one of the people said.

Over the past several weeks, teams from OpenAI and Microsoft have met to negotiate revenue-sharing and other restructuring details. Any cut in OpenAI’s payout to Microsoft would offer relief to a startup burning through cash on AI infrastructure like a drunken sailor. For now, the nonprofit-governed company remains a money pit with no end in sight.