Signing the "Divorce Timeline"! Microsoft and OpenAI "amicably part ways," marking the end of the "century marriage" that ushered in the AI era

Microsoft and OpenAI announced a restructuring of their partnership, marking the transition of this "century marriage" that began in 2019 into a "friendly separation" phase, while both parties retain the core cooperation framework and embark on independent development paths.

On October 28 local time, Microsoft and OpenAI announced the restructuring of their partnership, officially entering the "curtain call" phase of this "century marriage" that initiated the AI era.

From Microsoft's initial investment in OpenAI in 2019 to the signing of the "divorce timetable" today, this "century marriage" that opened the AI era has gone through five years. The current "friendly separation" continues the core cooperation framework while delineating a clear independent development path for both parties.

As stated in Microsoft's official blog: "Entering the next phase of the partnership, both companies are more capable than ever to continue creating excellent products that meet real-world needs."

In response, the two major Wall Street investment banks—JP Morgan and Morgan Stanley—quickly released research reports, but their interpretations of this "friendly separation" showed subtle differences.

JP Morgan: Uncertainty Eliminated, Microsoft Welcomes "Liberation Moment"

JP Morgan analyst Mark R Murphy pointed out in his report that the greatest significance of this agreement restructuring lies in "reducing the key uncertainties surrounding Microsoft’s stock." In his view, the sideways movement of Microsoft's stock price in recent months was not due to fundamental issues, but rather "the known unknown factors surrounding the recent adjustments to the OpenAI agreement affected investors' visibility judgments."

Murphy particularly emphasized the importance of extending the intellectual property licensing until 2032. Under the original framework, once OpenAI announced the achievement of AGI (Artificial General Intelligence), Microsoft's intellectual property licensing would immediately terminate—this was like the "sword of Damocles" hanging over Microsoft. The new agreement not only extends the licensing period to 2032 but also introduces an independent expert verification mechanism, providing an objective arbitration channel for defining the key concept of AGI.

"This provides Microsoft with a 7-year certainty window, ensuring business continuity for Microsoft's Copilot product line and Azure OpenAI services even in some AGI scenarios."

JP Morgan referred to Microsoft's commitment to provide OpenAI with $250 billion worth of Azure cloud services as a "positive surprise." Previously, the news of OpenAI reaching a $300 billion computing power cooperation with Oracle had raised market concerns about Microsoft's declining position. Murphy believes that this massive commitment "should be seen as a significant rebalancing of the scales."

However, JP Morgan also noted a key concession made by Microsoft: the abandonment of the right of first refusal as OpenAI's preferred computing power provider. Murphy's interpretation is quite sharp—this may stem from Microsoft's own risk management considerations.

"Our guess is that Microsoft is using protective measures related to customer concentration; we do not want to see 75% of Microsoft's RPO/backlog orders coming from a single entity's agreement."From a financial health perspective, the $250 billion may be close to Microsoft's risk management ceiling. JP Morgan would prefer to see longer contract terms to reduce the annual risk exposure of a single client.

JP Morgan characterizes this agreement as "a reasonable compromise." Microsoft has secured up to 7 years of technology licensing guarantees and substantial cloud computing orders, while OpenAI has gained flexibility to collaborate with third parties and space to transition to a profit-making entity.

Notably, OpenAI can now "co-develop non-API products with third parties," "release open-weight models," and "provide API access to U.S. government national security clients, regardless of the cloud service provider."

Murphy believes that the last clause echoes the Stargate project, allowing OpenAI to operate independently in sensitive areas such as national security.

JP Morgan maintains a "buy" rating on Microsoft with a target price of $565, based on an approximately 35 times 2026 price-to-earnings ratio. Murphy summarized:

"Clarification of the future structure should be seen as a positive factor, helping OpenAI and Microsoft achieve their respective goals, whether in collaboration or independent operation."

Morgan Stanley: Core Framework Retained, But the Era of Competition and Cooperation Has Arrived

In contrast to JP Morgan's "risk elimination theory," Morgan Stanley analyst Keith Weiss's team focuses more on the strategic shift behind the agreement. They pointed out at the beginning of their report that this agreement "marks a turning point in the deep cooperative relationship that began between the two parties in 2019," signaling "a new pattern of competition and cooperation among tech giants in the AGI race."

The Weiss team emphasized that while the new agreement continues the existing cooperation framework, the most critical change is reflected in "independence." The agreement explicitly states that Microsoft can now pursue AGI development independently or in collaboration with third parties—this is a significant breakthrough. However, if Microsoft uses OpenAI's IP to develop AGI, the related models will be subject to computational threshold limits, "which are significantly higher than the system scale currently used to train leading models."

Morgan Stanley's interpretation of the intellectual property terms is more detailed. The Weiss team pointed out that Microsoft's IP rights are actually divided into two categories:

Model and Product IP: Extended to 2032, covering models after AGI, but with safety precautions;

Research IP: Continues until an expert panel verifies AGI or 2030, whichever comes first.

It is noteworthy that research IP does not include model architecture, model weights, inference code, fine-tuning code, and IP related to data center hardware and software—Microsoft retains these non-research IP rights. Weiss emphasized in the report:

"The extension of Microsoft's IP rights may be an underestimated positive factor, as Microsoft can now leverage these IP rights across its entire business, and these rights have been extended to 2032 and include models after AGI."

For the same $250 billion Azure contract, Morgan Stanley's interpretation differs. The Weiss team believes that this deal "marks a significant shift in the commercial relationship between the two parties," placing Microsoft on equal footing with Oracle, becoming "one of" OpenAI's core cloud service providers.Morgan Stanley expects that this contract will significantly increase Microsoft's commercial bookings and remaining performance obligations (RPO) in the second quarter of fiscal year 2026 (ending December). Analysts have maintained their previous forecasts for OpenAI's contribution to Azure AI in their models and believe that this new contract will substantially boost revenue under the "cost" item for OpenAI.

Unlike JP Morgan's "uncertainty elimination theory," Morgan Stanley has listed a series of questions that remain to be clarified:

• Revenue sharing mechanism: Accounting treatment details and specific arrangements for "dispersed payments over a longer term";
• Specific terms of the contract: The duration of the $250 billion contract, its uses (inference, training, or across workloads), etc.;
• AGI timeline: This point will determine when Microsoft's potential "OpenAI revenue cliff" will arrive;
• Backlog size: How large the backlog attributable to OpenAI actually is.

The research report particularly emphasizes that the timeline for achieving AGI has become a key variable affecting the relationship between the two parties. Since the revenue sharing arrangement will continue until AGI is validated by an independent expert panel, "this could occur before or after the previously expected termination date of the collaboration in 2030."

Morgan Stanley maintains its "overweight" rating on Microsoft with a target price of $625 (higher than JP Morgan's $565) and lists Microsoft as a preferred stock in the software sector