In recent months, rumors have been rampant about OpenAI's transition to a for-profit organization. Recent news indicates that there is a major obstacle to this transition: its primary &#34;financial backer,&#34; Microsoft. The transition requires resolving key issues with Microsoft, including how to define the achievement of Artificial General Intelligence (AGI) and profit-sharing arrangements.
In October of this year, media reports revealed that a clause in the contract between OpenAI and Microsoft stipulates that if OpenAI develops AGI, Microsoft will not be able to use OpenAI's technology. This clause is intended to ensure that giants like Microsoft do not misuse AGI technology. The problem is that, according to the clause, OpenAI's board can decide when AGI is achieved. Earlier this month, another media outlet reported that OpenAI is negotiating with Microsoft to abandon this AGI clause in order to unlock investment potential.
On Thursday, December 26, Eastern Time, The Information reported that without a new agreement, Microsoft would not be able to use the technology developed by OpenAI once it reaches the AGI stage, leading to speculation that OpenAI issued a threat of having already achieved AGI to free itself from obligations to Microsoft.
After all, earlier this month, Altman candidly stated, &#34;I guess we will achieve AGI faster than most people in the world imagine, and its importance will greatly diminish.&#34; A post on Reddit indicated that Altman also mentioned that he and his colleagues at OpenAI believe AGI can be achieved using currently available AI chips.
However, reports indicate that under the existing agreement, OpenAI will not reach AGI anytime soon. The reports mentioned that the undisclosed agreement reached between Microsoft and OpenAI last year defined AGI as only being achieved when the systems developed by OpenAI can bring the maximum total profit, approximately $100 billion, to early investors like Microsoft.
OpenAI has stated that in order to balance shareholder returns with the ethical and social goals of developing AI for the benefit of humanity, it has limited the profits that investors can earn. Microsoft is entitled to a maximum profit of $93 billion. OpenAI previously discussed with Microsoft the possibility of increasing the annual profit cap by 20%, which, if raised, could bring the actual AGI profit target close to $120 billion.
Currently, OpenAI is still losing billions of dollars each year. Reports from over two months ago indicated that OpenAI told potential investors it expects to lose $14 billion in 2026, three times this year's losses, and that it will not achieve its first annual profit until 2029.
It remains unclear how OpenAI's transition to profitability will change the definition of AGI. Reports on Thursday indicated that some Microsoft leaders hope that even if OpenAI announces it has achieved AGI, Microsoft will still be able to obtain OpenAI's technology, and Microsoft will negotiate with OpenAI on this matter
<h2>Four Major Challenges: Equity, Exclusive Cloud Supply, Intellectual Property, 20% Revenue Share</h2>
A report from The Information this Thursday stated that since around October, OpenAI and Microsoft have been negotiating the potential restructuring of OpenAI, focusing on four main aspects: Microsoft's equity in OpenAI; whether Microsoft will continue to be OpenAI's exclusive cloud supplier; how long Microsoft will retain the right to use OpenAI's intellectual property in OpenAI's products; and whether Microsoft will continue to take a 20% share of OpenAI's revenue.
This is not the first time there have been reports of OpenAI considering changes to its profit-sharing arrangement with Microsoft in light of future transformations. In October, Wall Street News cited media reports that OpenAI and Microsoft were discussing how to allocate profits when OpenAI becomes a for-profit company, how much equity Microsoft should receive in return, and how to distribute equity, which is one of the biggest challenges, especially since OpenAI's valuation is difficult to determine. Additionally, other complex issues regarding rights to future profits also need to be discussed.
Under the current structure, OpenAI's nonprofit board oversees its for-profit subsidiary, which is responsible for developing ChatGPT and other technologies. The board consists of nine members, including CEO Sam Altman. Last November, in just four to five days, OpenAI experienced a dramatic &#34;palace coup&#34; where Altman was suddenly dismissed by the board and then returned with a newly formed board, exposing how fragile this organizational structure is.
Media reports indicate that since then, Altman has been pushing for OpenAI to completely part ways with its nonprofit status alongside some investors in OpenAI's for-profit subsidiary.
The report this Thursday pointed out that the negotiations between OpenAI and Microsoft reflect that as OpenAI's business accelerates, it is increasingly unable to accept the terms of the previous contract with Microsoft, including the 20% revenue share given to Microsoft and the dependency created by Microsoft being the exclusive cloud server supplier.
The report also noted that it is currently unclear when OpenAI and Microsoft plan to complete the transition to a for-profit organization, but they are under time pressure. If OpenAI fails to make changes within the next two years, recent investors can reclaim their investments, and OpenAI would also have to provide 9% interest, totaling about $7.2 billion. OpenAI's leadership has also informed employees that OpenAI hopes to buy back some of their shares after the transition, giving them ample reason to wish for a swift transformation

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According to the existing agreement, OpenAI will not achieve AGI anytime soon. OpenAI previously estimated a loss of $14 billion in 2026, three times this year's loss, and it will not achieve its first annual profit until 2029. It is unclear how the transformation will affect AGI's profit targets. Media reports indicate that since October, OpenAI and Microsoft have been negotiating structural changes, focusing on four issues: Microsoft's equity in OpenAI, exclusive cloud supply, the duration of using OpenAI's intellectual property, and a 20% revenue share

- OpenAI is facing challenges in its transition to a for-profit organization, primarily due to its relationship with Microsoft, which includes key issues like defining AGI and revenue sharing.  
- Recent reports indicate that OpenAI is negotiating to amend its contract with Microsoft, which currently restricts Microsoft's access to AGI technology developed by OpenAI.  
- The negotiations focus on equity stakes, exclusive cloud supply agreements, and revenue sharing, with urgency as OpenAI risks losing investor funding if changes are not made within two years.

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How difficult is it for OpenAI to achieve AGI? Profit target of 100 billion, and the transition to profitability must overcome four major challenges with Microsoft