In recent months, rumors about OpenAI's transformation into a profit-oriented organization have been rampant. Recent news shows that the biggest hurdle for OpenAI's transformation is its primary "sponsor" Microsoft, as the transformation requires resolving key issues with Microsoft, including how to define the achievement of Artificial General Intelligence (AGI) and revenue sharing.

In October of this year, media reported that there is a clause in the contract between OpenAI and Microsoft, which states that if OpenAI develops AGI, Microsoft will not be able to use OpenAI's technology. This clause aims to ensure that giants like Microsoft cannot misuse AGI technology. The problem is that under this clause, OpenAI's Board of Directors can decide when AGI will arrive. Earlier this month, media reported that OpenAI is negotiating with Microsoft to abandon this AGI clause to unleash investment potential.

On Thursday, December 26, Eastern Time, The Information reported that without a new agreement, Microsoft will not be able to use the technology developed by OpenAI after reaching the AGI stage, leading to speculation that OpenAI has issued a threat of having already achieved AGI to free itself from obligations to Microsoft.

After all, earlier this month, Altman bluntly stated, "I guess we will achieve AGI faster than most people in the world think, and its significance will greatly diminish." A post on the Reddit forum indicated that Altman also mentioned that he and his colleagues at OpenAI believe that AGI can be achieved using currently available AI Chips.

However, reports indicate that according to the existing agreement, OpenAI will not achieve 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 deserved by Microsoft's earliest investors, totaling approximately $100 billion in profit.

OpenAI has stated that to balance shareholder returns with the moral and social goals of developing AI for the benefit of humanity, it has limited the profits that investors may gain. Microsoft is entitled to a maximum profit of $93 billion, and OpenAI has previously discussed with Microsoft the hope of increasing the annual profit cap by 20%. If this increase occurs, the actual AGI profit target might approach $120 billion.

Currently, OpenAI is still losing several billion dollars a year; reports from over two months ago indicated that OpenAI told potential investors it expected a loss of $14 billion in 2026, three times this year's loss, and will not achieve its first annual profit until 2029.

It is currently unclear how OpenAI's transition to profitability will change the definition of AGI. Reports this Thursday indicated that some leaders at Microsoft hope that even if OpenAI announces that it has achieved AGI, Microsoft can still gain access to OpenAI's technology, and Microsoft will negotiate with OpenAI on this matter.

Four major challenges: Shareholder equity, exclusive cloud supply, intellectual property, and 20% revenue sharing.

The Information reported this Thursday that since around October, OpenAI and Microsoft have been discussing potential structural changes at OpenAI, with negotiations primarily focusing on four aspects: Microsoft's equity stake in OpenAI; whether Microsoft will continue as OpenAI's exclusive cloud supplier; how long Microsoft will retain the rights to use OpenAI's intellectual property in its products; and whether Microsoft will continue to take 20% of OpenAI's revenue.

This is not the first time there have been reports suggesting that OpenAI is considering changing the profit distribution with Microsoft after its future transformation. In October, Wall Street Journal cited media reports stating that OpenAI and Microsoft are discussing how profits should be shared when OpenAI becomes a for-profit company, including how much equity Microsoft should receive in return, and how to distribute that equity is one of the biggest challenges. Additionally, other complicated issues regarding future profit rights also need to be discussed.

Under the current structure, OpenAI's non-profit Board of Directors governs the for-profit subsidiary, which is responsible for developing ChatGPT and other technologies. The Board consists of nine members, including CEO Sam Altman. In just four or five days last November, OpenAI underwent a dramatic situation where Altman was suddenly dismissed by the Board and then returned with a newly formed Board, exposing how fragile this organizational structure is.

Reports indicate that since then, Altman has been pushing towards a complete departure from the non-profit organization with some investors from OpenAI's for-profit subsidiary.

Thursday's reports indicated that negotiations between OpenAI and Microsoft reflect that as OpenAI's business accelerates, it increasingly finds the previous contract terms with Microsoft unacceptable, including the 20% revenue share given to Microsoft and the dependency OpenAI has on Microsoft's servers as its exclusive cloud supplier.

It is currently unclear when OpenAI and Microsoft plan to complete the transition to a for-profit organization, but time is pressing. If OpenAI fails to make the change within the next two years, the recently involved investors can reclaim their investments, and OpenAI will also have to provide 9% interest, totaling approximately $7.2 billion. OpenAI's leadership has also communicated to employees that OpenAI hopes to buy back some of their shares after the transition, providing ample reason for them to expedite the transition.