00:00This just crossing the wire, a new deal in PACT between Microsoft and OpenAI.
00:07It's a new stake in OpenAI's PBC.
00:11What does that mean?
00:12Well, joining us is Bloomberg Tech co-host Caroline Hyde.
00:14And Caroline, with these new agreements, first of all, Microsoft immediately jumping on this news.
00:18But I just looked through the headlines, and I'm going to be honest, a lot of it is like a foreign language to me.
00:23But it does just show that the two are coming closer together.
00:26What exactly is this agreement?
00:27We knew that a memorandum of understanding had been signed, and the details were getting close,
00:32for this public benefit corporation, that's the PBC bit, that ultimately OpenAI is forming.
00:38It wants to be a for-profit business.
00:40It was founded as a not-for-profit.
00:42The not-for-profit will still oversee OpenAI's public benefit corporation.
00:47And now we try and work out who has stakes in what.
00:49We understand Microsoft has $135 billion overall valuation ownership of the public benefit corporation.
00:57That's bigger than OpenAI's.
00:59We understand a few months back, Brett Taylor, the chairman of OpenAI, put out a statement that the overall philanthropic arm of OpenAI would hold a $100 billion valuation stake in the public benefit corporation.
01:12But remember, they've raised money from others.
01:14Thrive, for example, is in there.
01:15They will get a stake in this PBC, as it's known.
01:17But what's interesting is that OpenAI has still got a contractual obligation to buy Azure, to buy cloud from Microsoft going forward, to the tune of $250 billion worth of Azure services.
01:28But this is also talking about how once AGI, once artificial general intelligence is hit, in whatever form we decide that that is made, what happens then?
01:39Because this was always the deal between Microsoft and OpenAI.
01:42When Microsoft first pumped money into the company, it was they would have exclusive rights to OpenAI's overall IP until AGI was hit.
01:50Well, now we start to understand really what's going to happen at that particular point as well.
01:54And they say Microsoft retains IP rights, intellectual property rights, Azure API exclusivity until AGI.
02:02But OpenAI can now jointly develop some products with third parties.
02:07You've already seen that happening.
02:09OpenAI was starting to be able to get cloud from others, like Oracle, for example, like Google, because they couldn't just get enough cloud from Microsoft.
02:15Microsoft, in turn, is starting to offer anthropic within the overall co-pilot offering, not just OpenAI.
02:22So these are the new terms of the deal.
02:23We knew this was coming and this is a forward-looking relationship.
02:27And that's why there's such a sigh of relief, because many had wondered what on earth would happen when OpenAI did indeed solidify that public benefit corporation angle.
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