REDMOND, Washington: Microsoft and OpenAI have agreed to a new framework for their partnership, signing a non-binding deal that would allow the AI startup to restructure into a for-profit company, a move seen as pivotal to its long-term funding ambitions.

The two firms said they are working to finalize the terms of a definitive agreement, though financial details were not disclosed. The deal comes as OpenAI seeks to adopt a more conventional governance model and prepare for a possible public listing while continuing to raise billions to support its artificial intelligence research and massive computing needs.

Microsoft, which first invested US$1 billion in OpenAI in 2019 and added another $10 billion in 2023, has long been its closest partner. Under their previous arrangement, Microsoft enjoyed exclusive rights to sell OpenAI’s software through its Azure cloud and held preferred access to its technology.

That dominance began to ease this year as OpenAI signed $300 billion worth of contracts with Oracle for its Stargate data center project and reached a separate cloud deal with Google. The startup is increasingly pursuing multiple partnerships to meet surging demand for AI services.

OpenAI’s nonprofit arm is also set to benefit from the restructuring. Under current terms, it will receive more than $100 billion — around 20 percent of the $500 billion valuation OpenAI is targeting in private markets — making it one of the wealthiest nonprofits in the world, according to a memo from Bret Taylor, chair of OpenAI’s nonprofit board.

For Microsoft, the goal is to secure continued access to OpenAI’s models, even if the company one day declares its technology has reached human-level intelligence — a milestone that under existing terms would end their agreement.

Regulatory approval remains a hurdle. Attorneys general in California and Delaware must sign off on OpenAI’s conversion plan, which the company hopes to complete by year-end to avoid losing billions in promised funding.

The companies did not disclose how much of OpenAI Microsoft will own under the new structure, or whether it will keep exclusive access to the startup’s most advanced AI systems.

Despite their close ties, Microsoft and OpenAI are also competitors. Both develop chatbots and AI tools for consumers and businesses. Microsoft has recently accelerated efforts to build its own models to lessen its reliance on OpenAI technology.