OpenAI-Microsoft deal under strain as they clash over AGI clause
26 Jun 2025

The future of the long-standing partnership between OpenAI and Microsoft hinges on a contentious term in the artificial intelligence (AI) industry: artificial general intelligence (AGI).

The two tech giants are currently embroiled in tense negotiations over their contract, which allows OpenAI to restrict Microsoft's access to its future technology once AGI is reached.

However, Microsoft is fighting hard against this clause.

OpenAI, Microsoft have different interpretations of AGI
Disagreement

AGI is generally viewed as the stage where generative AI systems attain human-like intelligence. However, OpenAI and Microsoft have different interpretations of this concept.

While OpenAI executives, including Sam Altman, think they are close to declaring their AI tools AGI-capable, Microsoft's CEO, Satya Nadella, remains skeptical about the feasibility of such a milestone.

This disagreement reflects a broader debate in Silicon Valley about the potential sophistication of advanced tools.

OpenAI's transition to for-profit triggers renegotiation of commercial agreement
Transition

As OpenAI prepares to transition into a for-profit entity, the two companies are renegotiating their commercial agreement. This change could unlock billions of dollars in funding for OpenAI's AI tools.

Currently, Microsoft mandates that OpenAI sell its AI software only through Azure.

Despite this, Microsoft has shown a willingness to take an equity stake of about 35% in the new company during recent negotiations.

How will the AGI declaration work?
Future implications

OpenAI has considered the possibility of declaring AGI through an AI coding agent that surpasses an advanced human programmer's capabilities.

The contract only requires OpenAI's board to declare AGI in good faith, but Microsoft could easily sue the company, leading to a lengthy legal battle.

Alternatively, OpenAI could declare a higher tier of AGI called "sufficient AGI" when its AI systems can financially compensate Microsoft for future profits.

Microsoft wants to remove AGI clause or gain exclusice access
Contractual limitations

The contract between OpenAI and Microsoft, which runs through 2030, prohibits Microsoft from developing AGI on its own.

Despite being OpenAI's largest outside shareholder with veto power over any major funding decision that could dilute its equity, some Microsoft executives were against the AGI clause when the partnership was first negotiated in 2019.

Now, as part of recent negotiations, Microsoft hopes to either remove this clause entirely or gain exclusive access to OpenAI's intellectual property even after AGI is declared.