Updated OpenAI agreement removes overhang for Microsoft, says Evercore ISI

Evercore ISI highlights that updated details of Microsoft’s (MSFT) relationship with OpenAI include the fact that the company will own an approximately 27% stake, worth about $135B, which the analyst estimates would equate to about $18 per share in value. OpenAI remains Microsoft’s frontier model partner and Microsoft continues to have exclusive IP rights and Azure API exclusivity until Artificial General Intelligence. In addition, OpenAI has contracted to purchase an incremental $250B of Azure services, though Microsoft will no longer have a right of first refusal to be OpenAI’s compute provider. The firm, which expects to get a better understanding on how the change in this relationship and structure could impact the accounting around Microsoft’s investment on the earnings call tomorrow, views the updated pact removing an overhang for Microsoft and keeps an Outperform rating and $625 price target on the shares.