OpenAI commits $1.4T to infrastructure; Nvidia projects $500B in chip sales. Same day, same pitch: AI requires sovereign-scale capital. The tension: revenue is still catching up to the rhetoric, and someone will hold expensive capacity if demand falters.
OpenAI's restructure puts a $130B nonprofit in control of a $500B for-profit. Microsoft locked in 27% and access through 2032. But a year of regulatory review produced new numbers, not new transparency—and Microsoft's accounting gaps remain unaddressed.
Good Morning from San Francisco, Adobe stopped pretending one AI model will rule them all. The company built a switchboard
OpenAI's restructure puts a $130B nonprofit in control of a $500B for-profit. Microsoft locked in 27% and access through 2032. But a year of regulatory review produced new numbers, not new transparency—and Microsoft's accounting gaps remain unaddressed.
OpenAI says its governance puzzle is solved; the accounting footnotes say otherwise. On Tuesday the company announced it has completed a recapitalization that puts a newly named nonprofit—the OpenAI Foundation—in control of a for-profit public benefit corporation and starts the Foundation with roughly $130 billion in equity.
Microsoft emerged with 27% of the for-profit, a stake it now values at about $135 billion, and secured extended rights to OpenAI’s technology through 2032, including if the company declares it has reached AGI, subject to verification by an outside panel. The headline numbers came via Bret Taylor’s recapitalization note.
The Breakdown
• OpenAI Foundation holds $130B equity (26%) in for-profit valued at $500B; Microsoft owns 27% worth $135B
• Microsoft surrendered compute priority for $250B Azure commitment and model access through 2032, including post-AGI technology
• Year-long AG negotiations produced new structure but no published governance mechanics or valuation milestone details
• Microsoft still doesn't disclose OpenAI stake's carrying amount, transaction flows, or related-party details despite analyst criticism
OpenAI long lived in a gray zone: a nonprofit board controlling a capped-profit subsidiary, with the world’s most expensive compute habit. The new architecture formalizes the split. The for-profit is now OpenAI Group PBC; the nonprofit is the OpenAI Foundation, which “remains in control” and gains more ownership if the company hits an unspecified valuation milestone. The Foundation is launching a $25 billion program focused on health (open, responsibly built datasets and funding for scientists) and AI resilience (technical defenses, not policy).
On the capital side, the Microsoft relationship moved from ambiguity to contract. The companies replaced soft understandings with a definitive deal that: extends Microsoft’s product and model IP rights to 2032 (including post-AGI models if an expert panel certifies an AGI declaration); removes Microsoft’s right of first refusal on OpenAI’s compute; and commits OpenAI to $250 billion of Azure purchases. Microsoft shares rose on the news. That’s not a coincidence.
If 27% equals $135 billion, the implied OpenAI valuation is about $500 billion. The Foundation’s $130 billion stake implies roughly a quarter of the company with the remainder held by employees and other investors; business press reports align to that split, though OpenAI’s post does not publish formal percentages. Either way, the philanthropic war chest scales with the for-profit’s success. That’s the design.
The Azure commitment is the most consequential line in the fine print. It gives Microsoft something better than control: visibility. A $250 billion spend anchors forward revenue, smooths capacity planning, and cushions any future model-access hiccups. For OpenAI, surrendering ROFR buys negotiating freedom with other clouds and chip partners; the company keeps flexibility while promising a mountain of Azure consumption. That’s a trade both sides can explain to boards.
The numbers clarified the story. The disclosures did not. Microsoft has treated OpenAI as an equity-method investment and routed OpenAI-related impacts through a $4.7 billion “other, net” line—without listing OpenAI in related-party footnotes or breaking out the stake’s carrying value and mechanics. Analysts flagged this in recent notes; the Wall Street Journal called the opacity untenable. Tuesday’s percentages do not answer basic questions: How do revenue-sharing flows appear in Microsoft’s P&L? What is the carrying amount of the stake today? How have losses from OpenAI reduced it over time? If OpenAI is now valued at $500 billion and Microsoft says its piece is worth $135 billion, where do those gains—and the costs of feeding them—show up?
Investors can do the napkin math. They can’t audit the pipeline. That matters because Microsoft’s AI story is increasingly inseparable from OpenAI’s.
OpenAI says the Foundation “controls” the PBC and that the recapitalization followed nearly a year of work with the California and Delaware attorneys general. It does not publish the governance mechanics that make control real with a minority economic stake—board composition, vetoes, reserved matters, or triggers beyond a hazy valuation milestone. Nor does it specify what, exactly, changed at the AGs’ request. Public benefit corporation status requires balancing stakeholder interests, but it doesn’t impose SEC-style reporting or uniform public-benefit disclosures. In practice, the model relies on trust in the board and on voluntary transparency from the company that’s funding the foundation that oversees it. That circularity will be tested.
Microsoft gave up exclusivity and got certainty. It accepted dilution—from a previously cited 32.5% to 27%—while tripling the mark on its stake’s value. It extended its IP runway two additional years, hardened access rights around an AGI declaration, and swapped a structural control lever (ROFR) for a massive, time-anchored revenue stream. OpenAI kept mission-first optics and room to shop compute, plus the ability to jointly build with others even as API distribution remains tied to Azure. Both sides de-risked the only scenario that truly matters to them: the next few years of scale.
The story still hinges on two unverified parts. First, the Foundation’s control is described, not demonstrated. Without published governance terms, outsiders can’t tell where mission oversight stops and commercial expedience begins. Second, Microsoft’s financial treatment of OpenAI remains a black box. The company now owns 27% of something priced like a Big Tech tier-one asset, yet the earnings pathway and related-party flows are largely invisible. If OpenAI is critical infrastructure—for Microsoft’s products and for the broader economy—opacity isn’t a virtue. It’s a risk.
Q: What's a public benefit corporation and how is it different from a regular company?
A: A public benefit corporation must consider stakeholder interests beyond shareholders—employees, communities, environment—not just profits. Unlike standard corporations that legally prioritize shareholder returns, PBCs can weigh mission against money. But there's no standardized reporting requirement, so companies define "benefit" internally. OpenAI's PBC status lets it claim mission alignment without SEC-level disclosure obligations.
Q: How did Microsoft's ownership drop from 32.5% to 27% but the stake's value increased to $135 billion?
A: Dilution at a rising valuation. When OpenAI raised new funding rounds, Microsoft's slice of the pie got smaller—but the pie grew massively. At 32.5% of a roughly $400 billion valuation, Microsoft held about $130 billion. At 27% of $500 billion, it holds $135 billion. Less ownership of something worth far more is still a gain.
Q: What's equity-method accounting and why does it matter for Microsoft's OpenAI investment?
A: Equity-method accounting applies when a company owns 20-50% of another and has "significant influence." Under this method, Microsoft records its share of OpenAI's losses, reducing the investment's carrying value on its balance sheet. It also requires related-party disclosures—details about transactions between connected companies. Microsoft uses equity-method accounting for OpenAI but doesn't include it in related-party footnotes, creating a disclosure gap.
Q: What's the "valuation milestone" that triggers more Foundation ownership, and when does it happen?
A: OpenAI didn't specify. The announcement says the Foundation gains additional ownership when the for-profit reaches an unspecified valuation milestone, but provides no threshold number, timeline, or measurement method. This is the governance trigger that determines when the nonprofit's stake grows—and it's entirely opaque. No public reporting requirement exists to track when or how this occurs.
Q: Why does Microsoft's access extending to 2032—including AGI models—matter strategically?
A: It locks in Microsoft's competitive position through the AGI transition. If OpenAI achieves artificial general intelligence—AI that matches human capability across tasks—Microsoft retains access rights subject to expert panel verification. This seven-year runway gives Microsoft predictability for product development while OpenAI scales. Without it, Microsoft faced uncertainty about long-term rights as OpenAI's value and strategic importance grew.
Marcus Schuler
Marcus Schuler
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