SoftBank's $20 billion investment may fall through: OpenAI and Microsoft deadlocked over restructuring!

OpenAI is racing against time to restructure its business to meet the huge investment promised by SoftBank. At the end of March, OpenAI announced that SoftBank would lead an investment of $10 billion in OpenAI as start-up capital, and conditionally follow up with an investment of $30 billion by the end of this year.

However, this goal was blocked by Microsoft, the major shareholder. According to the agreement, if OpenAI fails to restructure into a for-profit entity by December 31 this year, SoftBank's total investment may be reduced to $20 billion.

Previously, OpenAI had given up on transforming into a for-profit company due to legal obstacles and instead tried to restructure into a public welfare organization supervised by a non-profit parent company. But this requires the support of Microsoft. Unfortunately, sources pointed out that the negotiations between the two sides on the new for-profit structure have become increasingly intense and have now reached a deadlock.

Media reports pointed out that OpenAI even considered asking antitrust regulators to intervene to review whether there are potential competition barriers in its agreement with Microsoft to weaken Microsoft's ability to restrict OpenAI.

On Wednesday, there were also reports that Microsoft may withdraw from negotiations with OpenAI if the two sides cannot reach an agreement on key issues. Key issues include the size of Microsoft's future holdings in OpenAI.

Negotiation crux

The two key issues in the negotiations between OpenAI and Microsoft are the proportion of Microsoft's shareholding in OpenAI after the reorganization and the strict regulations on technology sharing between the two sides.

It is reported that OpenAI hopes to change the terms of the existing agreement with Microsoft. According to previous agreements, after Microsoft's investment, it obtained a majority stake in OpenAI's for-profit business, as well as exclusive access to OpenAI's API and models on Microsoft Cloud, revenue sharing, and the right to use OpenAI's intellectual property, which will be valid until 2030.

In addition, OpenAI also hopes to prevent Microsoft from obtaining the technology obtained by OpenAI's $3 billion acquisition of AI coding tool Windsurf.

Some media pointed out that Microsoft has made a proposal to give up its equity in OpenAI in exchange for priority use of OpenAI technology in the future. According to previous news, Microsoft has also made concessions on the original terms. For example, after the Stargate project was made public, Microsoft gave up OpenAI's exclusive right to use Microsoft cloud services.

Previously, Microsoft and OpenAI said in a joint statement that the two companies have established a long-term and fruitful partnership and brought excellent artificial intelligence tools. At present, the negotiations between the two companies are still ongoing, and both are optimistic that the two sides will continue to work together in the next few years.

But some insiders also revealed that if the negotiations finally break down, Microsoft is ready to withdraw its investment. This is definitely not a good thing for OpenAI, which is seeking restructuring and facing legal proceedings from co-founder Musk.