ChatGPT-maker OpenAI has entered into a non-binding memorandum of understanding (MoU) with Microsoft to redefine their partnership.

The two companies did not disclose the specifics of the new contractual terms, as they are working towards finalising a definitive agreement. This prospective agreement is expected to enable OpenAI to transition into a for-profit organisation.

In a joint statement, the two companies said: “Together, we remain focused on delivering the best AI tools for everyone, grounded in our shared commitment to safety.”

According to a Reuters report, the signing of the MoU follows OpenAI’s ongoing discussions with Microsoft, as the former aims to adopt a more conventional governance model and potentially go public to support its AI initiatives.

Microsoft’s investment in OpenAI includes $1bn in 2019 and an additional $10bn in early 2023.

The previous agreement gave Microsoft exclusive rights to market OpenAI’s software tools via its Azure cloud platform. The tech major also had preferential access to OpenAI’s technology.

Initially, Microsoft was OpenAI’s exclusive compute provider. However, this year, Microsoft relaxed its exclusivity, allowing OpenAI to embark on its data centre project, Stargate.

Alongside the MoU signing, OpenAI’s nonprofit board chairman Bret Taylor said in a memo that OpenAI’s nonprofit arm is set to receive more than $100bn. This represents nearly 20% of the $500bn valuation that the company is seeking in private markets. It will also position OpenAI as one of the most well-funded nonprofits.

The companies have not revealed Microsoft’s ownership stake in OpenAI or if Microsoft will retain exclusive access to OpenAI’s latest models and technology.

OpenAI will need regulatory approval from attorneys general in California and Delaware for its new structure. The company aims to complete the conversion by the end of the year to avoid losing billions in funding linked to this timeline.