Microsoft and OpenAI’s famed AGI agreement is dead

OpenAI and Microsoft’s partnership-turned-situationship just got even less committed. And a clause about artificial general intelligence, which has for years dictated the future of their deal, has officially been dropped.

On Monday morning, Microsoft announced a handful of big changes to its long-standing OpenAI deal. Microsoft will remain OpenAI’s “primary cloud partner, and OpenAI products will ship first on Azure, unless Microsoft cannot and chooses not to support the necessary capabilities.” But OpenAI can “now serve all its products to customers across any cloud provider.” That lets OpenAI pursue its goals of courting enterprise customers as it reportedly prepares to go public — opening the door to working with Amazon or Google, for instance, and attempting to relieve restraints on its compute that have led to spats with Microsoft. Microsoft appears to still receive a cut of revenue from these outside agreements.

Perhaps more notably, the two companies killed the contract’s “AGI clause,” which set a variety of conditions if one of them achieved “artificial general intelligence.” (It’s a vaguely defined industry term that typically means AI systems that equal or surpass human intelligence on a wide range of tasks.)

The change impacts a revenue-sharing agreement, which was supposed to stay in place until AGI was declared. But now, the revenue-share payments coming from OpenAI to Microsoft will only continue through 2030 — and though they’ll continue “at the same percentage,” they’ll also be “subject to a total cap” instead of continuing in perpetuity. The payments will also continue and then end “independent of OpenAI’s technology progress,” which under any reasonable logic includes AGI. So RIP to that deal.

This is the second renegotiation of the clause. When OpenAI completed its controversial for-profit restructuring in October, it needed Microsoft’s blessing — and in the process of getting that blessing, the two companies struck a new deal. Before the October contract changes, Microsoft would’ve lost its rights to OpenAI’s technology once the latter had reached AGI. But Microsoft’s IP rights for OpenAI’s models and products were extended through 2032 — and Microsoft’s rights included models even after an independent panel theoretically declares AGI had been reached.

Now, there’s no independent panel, there’s no if-this-then-that language for if or when AGI is declared, and OpenAI may never have to actually announce if it reaches that milestone. Microsoft’s license to OpenAI’s models and products that it holds through 2032 is now non-exclusive. Any other competitor can now join in.

Microsoft previously owned about 27 percent (on an “as-converted diluted basis, inclusive of all owners”) in the public benefit corporation. The new terms state that “Microsoft continues to participate directly in OpenAI’s growth as a major shareholder” but doesn’t dictate Microsoft’s ownership stake, though there’s also no indication it’s changed.

The pressure is on for OpenAI to get closer to turning a profit, and it and its competitors have been burning a lot of investor cash in their chase to acquire more compute and reach AGI. OpenAI has stated that it’s going all in on enterprise and coding in order to chase those bigger potential revenue drivers, and it’s been methodically cutting out so-called “side quests” like Sora and ChatGPT’s planned erotica features. It also restructured its science department. The new deal with Microsoft is one more step.