Evercore: Microsoft's new agreement with OpenAI removes ambiguity around AGI, clarifies IP rights before 2032, maintains "outperform" rating

According to the Zhitong Finance APP, investment company Evercore ISI stated that the revised agreement between Microsoft (MSFT.US) and OpenAI should reduce the ambiguity surrounding general artificial intelligence (AGI) for the former and provide greater flexibility for the latter.

According to a joint statement from the two companies on Monday, in exchange for terminating the exclusive arrangement, Microsoft will no longer pay revenue sharing for OpenAI products resold through its cloud platform. This revised agreement aims to simplify the long and complex cooperative relationship between the two parties while providing greater flexibility for both to explore new business opportunities.

Evercore analyst Kirk Materne wrote in a report to clients: "From a macro perspective, the new agreement simplifies the relationship between the two parties, with Microsoft giving up some exclusivity in exchange for greater transparency, flexibility, and economic certainty. OpenAI gains more space to operate across the market, while Microsoft retains its preferred strategic role, long-term access to OpenAI technology, and continued participation in OpenAI's growth. We believe the key point is that the terms linked to AGI seem to have been removed from the commercial framework, clarifying the intellectual property (IP) access rights until 2032 and the relevant deadlines for the revenue-sharing economic model until 2030, although there is now a cap in place. The bottom line is that we believe this revised agreement should not come as a surprise to investors, as Microsoft has increasingly shown interest in a broader multi-model strategy, while OpenAI clearly has the motivation to expand its distribution channels more widely across the market."

Materne rates Microsoft as "Outperform" with a target price of $580.

General artificial intelligence (AGI) has previously been described as the "singularity"—the moment when technology surpasses humans and becomes irreversible.

As part of the modified agreement, Microsoft will continue to be OpenAI's primary cloud partner, and OpenAI's products will be prioritized for release on Azure. However, there is now an adjustment stipulation: if Microsoft "cannot and chooses not to support the necessary capabilities," OpenAI may seek other partners.

Additionally, OpenAI can offer all its products through any cloud service provider (such as Amazon AMZN's AWS) to customers. Microsoft will continue to have the license to use OpenAI's intellectual property for its models and products until 2032, but this license will now be non-exclusive.

Microsoft will also no longer pay revenue sharing to OpenAI, but until 2030, regardless of OpenAI's technological progress, Microsoft will receive revenue sharing payments from OpenAI. Finally, the Windows manufacturer added that Microsoft remains a major shareholder of OpenAI.

Microsoft is scheduled to announce its fiscal third-quarter earnings report after the market closes on April 29