Now We Know: Microsoft Owns a $135 Billion Stake in OpenAI. The Stock Is Rising.

Microsoft Chairman and Chief Executive Officer Satya Nadella (L) speaking with OpenAI Chief Executive Officer Sam Altman, at the Microsoft Build 2025, conference in May. (JASON REDMOND/AFP via Getty Images)

Key Points

• Microsoft owns 27% of OpenAI, valued at $135 billion, following OpenAI’s latest funding round, which valued the company at $500 billion.
• OpenAI is transitioning to a traditional corporate structure to attract investors, a process delayed by California and Delaware attorneys general.
• OpenAI committed to an additional $250 billion multiyear contract with Microsoft’s Azure unit, increasing its total AI computing commitments.

As OpenAI’s most important early investor, Microsoft has long been known to own a lot of the artificial-intelligence start-up’s stock, but it was hard to put a number on it. On Tuesday, we got the most clarity yet from a new agreement spelled out in a Microsoft press release: It owns 27% of OpenAI, which is now valued at $500 billion after its latest funding round in October.

Microsoft shares were up 1.9% in Tuesday trading.

OpenAI has a unique corporate structure, and it is attempting to change that to open the door to more investors. Originally formed as a non-profit artificial-intelligence research lab, OpenAI soon found that it could not raise enough money through philanthropy to build ChatGPT. A new for-profit entity was formed to accept Microsoft’s investment in 2019, but it remained under the control of a non-profit board.

After a Nov. 2023 leadership battle with CEO Sam Altman, the non-profit board became a liability in the eyes of many potential investors. A record-breaking $40 billion fundraising round this March came with strings attached: Half of it is conditioned on OpenAI converting by the end of the year to a more traditional corporate structure that grants shareholders typical rights. That process is still being held up by the attorneys general of California, where OpenAI is headquartered, and Delaware, where it is incorporated.

Microsoft had been another hurdle since it owned so much OpenAI stock, but in September the companies announced a framework for a deal to clear the way, and now we see the details. Microsoft’s stake in the for-profit, currently valued at $135 billion, will exceed the $130 billion stake of the OpenAI nonprofit, now called the OpenAI Foundation. Together the two own over half the company, though their stakes will likely be diluted over time as OpenAI sells more equity.

Much of the previous structure of the OpenAI-Microsoft relationship will remain intact, but there will be one key difference regarding OpenAI’s substantial cloud computing bills at Microsoft’s Azure unit. The terms had not previously been disclosed, except that Microsoft had right-of-first-refusal for any cloud contracts. That’s gone, but in exchange, OpenAI added another $250 billion multiyear contract to whatever it was already paying Microsoft.

OpenAI has over a trillion dollars worth of multiyear commitments for AI computing, and it just added another $250 billion. The amount of OpenAI counterparty risk to the AI trade continues to grow.

Microsoft’s stake also gives us a little clearer picture of the large losses at OpenAI, despite its rapid user and revenue growth. Before the most recent fundraising round, Microsoft owned 32.5% of OpenAI. The tech giant accounts for its OpenAI investment using the equity method, and in fiscal year 2025, which ended in June, it booked $4.7 billion in losses from its equity-method investments. If all of that was OpenAI, that means the AI developer lost $14.5 billion in that period.

Write to Adam Levine at adam.levine@barrons.com