Wall Street reacts to Microsoft and OpenAI's new deal

(Reuters) – Microsoft and OpenAI reached a deal to allow the ChatGPT maker to restructure itself into a public benefit corporation, valuing OpenAI at $500 billion and giving it more freedom in its business operations. The deal removes a major constraint on raising capital for OpenAI that existed since 2019, when it signed a deal with Microsoft that gave the tech giant rights over much of OpenAI's work in exchange for costly cloud computing services. As its ChatGPT service exploded in popularity, those limitations became a notable source of tension between the two companies. Here are reactions from analysts and investors:  RAIMO LENSCHOW, ANALYST, BARCLAYS, NEW YORK "We see Microsoft shares acting better again. The new OpenAI agreement creates a solid framework for years to come, and removes an overhang that has pressured shares in recent months. We hope that solid earnings tomorrow will be the next driver to put Microsoft back on investors' radar." "Although Microsoft will lose its right of first refusal as a compute provider, we view the large service commitment (from OpenAI) as a significant positive for the company's cloud business." DAN MORGAN, PORTFOLIO MANAGER, SYNOVUS TRUST, ATLANTA "This is very important as it clarifies the relationship between Microsoft and OpenAI, and creates a path to profitability for OpenAI. As of the first half of 2025, OpenAI generated $4.3 billion in revenue but also reported a significant net loss of $13.5 billion." MICHAEL ASHLEY SCHULMAN, CHIEF INVESTMENT OFFICER, RUNNING POINT CAPITAL "The right of first refusal on compute goes away, which sounds like Microsoft letting the golden goose date other clouds, yet OpenAI simultaneously commits to purchase about $250 billion of Azure (services)." "That is like telling your favorite restaurant that you plan to try new places, while pre-paying for the chef's table for the next few years. Net result, Azure locks in a leviathan backlog, while appearing less exclusive to regulators." JACOB BOURNE, ANALYST, EMARKETER "OpenAI's new ability to jointly develop products with third parties provides more flexibility. The company also now has greater freedom to shop around with other cloud providers, but there’s still significant financial interdependence between OpenAI and Microsoft." "The AGI focus here is really interesting. Even as we see OpenAI make more bold commercialization moves, it’s a reminder that the company's real focus is building these frontier general-purpose models." MATT BRITZMAN, SENIOR EQUITY ANALYST, HARGREAVES LANSDOWN, GREATER BRISTOL AREA, UK "For OpenAI, the shift to a Public Benefit Corporation is essential – not only to raise much-needed capital amid its aggressive deal-making, but also to satisfy investor conditions tied to governance changes. Overall, the move provides clarity and sets the stage for both players to scale their strategies with greater confidence." "This agreement is also a positive for Microsoft, as it removes uncertainty around revenue sharing, advanced AI milestones and product boundaries, while keeping the partnership aligned. Both companies now have the flexibility to pursue their own AI ambitions independently, which should foster innovation without eroding shared objectives." CHRIS BEAUCHAMP, CHIEF MARKET ANALYST, IG GROUP, UNITED KINGDOM "The timing looks right: AI is finally entering the deployment phase from pure hype. But the risks are real. Governance is messy, with the non-profit foundation retaining oversight, which could complicate decisions when profit and mission are in conflict. "Regulatory scrutiny is inevitable given Microsoft's dominance, and the valuation assumes OpenAI will keep growing at breakneck speed. Any slowdown and this looks expensive." ZEUS KERRAVALA, PRINCIPAL ANALYST, ZK RESEARCH, BOSTON, MASSACHUSETTS "The deal allowing OpenAI to use other cloud providers fundamentally redefines the structure of the AI industry by ending Microsoft Azure's compute exclusivity and making the AI race a multi-cloud infrastructure war. This is good for all involved. OpenAI's cloud diversification is a necessary strategic move driven by two factors: an insatiable demand for computing power and a pursuit of operational independence." "Microsoft retains a strategic, yet more complex, relationship with its most critical AI partner, but this opens the door for it to work with more AI companies." ADAM SARHAN, CEO, 50 PARK INVESTMENTS, NEW YORK "The deal marks a turning point for both Microsoft and OpenAI, as the restructuring into a public benefit corporation provides OpenAI with a more stable governance structure and greater flexibility for long-term growth. Microsoft's 27% stake —valued at around $135 billion — also reinforces its strategic commitment to AI leadership." "While this move clears most of the major regulatory and governance hurdles that surfaced earlier this year, it does not mean all challenges are behind them. OpenAI still faces ongoing scrutiny around transparency, data usage, and safety oversight. But overall, this structure should provide a clearer path forward for innovation and accountability." GIL LURIA, HEAD OF TECHNOLOGY RESEARCH, DA DAVIDSON, PORTLAND, OREGON "The restructuring of OpenAI and its deal with Microsoft is an important milestone for the company's move forward towards AGI. It resolves the longstanding issue of OpenAI being organized as a not-for-profit (organization) and settles the ownership rights of the technology vis-a-vis Microsoft. The new structure should provide more clarity on OpenAI's investments path, thus facilitating further fundraising." ART HOGAN, CHIEF MARKET STRATEGIST, B RILEY WEALTH, NEW YORK "It certainly seems to be the in-vogue thing to do. Over the course of the last several weeks, everyone's come out and said what they are going to do with OpenAI. And I think that tends to become very self-fulfilling. So when the news gets dropped, you know, whether it's Adobe or today with Microsoft, you have got the potential to become an even more important player in the AI revolution." (Reporting by Akash Sriram, Arnav Mishra, Jaspreet Singh, Harshita Mary Varghese, Avinash P, Deborah Sophia, Arpan Daniel Varghese and Kanchana Chakravarthy in Bengaluru; Editing by Shinjini Ganguli)

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