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

Investment firm Evercore ISI states that the revised agreement between Microsoft Corporation (MSFT.US) and OpenAI should reduce ambiguity for the former surrounding Artificial General Intelligence (AGI) and provide greater flexibility for the latter. According to a joint statement released by the two companies on Monday, as a condition for ending the exclusive arrangement, Microsoft Corporation will no longer pay revenue share on OpenAI products resold through its cloud platform. This revised agreement aims to simplify the complex long-term relationship between the two parties, while providing greater flexibility 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 Corporation giving up some exclusivity in exchange for greater transparency, flexibility, and economic certainty. OpenAI gains more space to operate in the entire market, while Microsoft Corporation still 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 terms related to AGI seem to have been removed from the commercial framework, which clarifies the IP access rights until 2032 and the revenue sharing economic model deadline until 2030, although now with a cap. In summary, we believe that this revised agreement should not come as a surprise to investors, as Microsoft Corporation has increasingly shown an interest in a broader multimodal strategy, while OpenAI clearly has the incentive to expand distribution channels more widely across the market." Materne rates Microsoft Corporation as "outperform" with a target price of $580. Artificial General Intelligence (AGI) has been described in the past as the "singularity" - the moment when technology surpasses humanity and becomes irreversible. As part of the revised agreement, Microsoft Corporation 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 stating that if Microsoft Corporation "cannot and chooses not to provide necessary capabilities," OpenAI can seek other partners. Additionally, OpenAI can offer all its products through any cloud service provider (such as Amazon.com, Inc.'s AWS) to customers. Microsoft Corporation will maintain a license to use OpenAI's intellectual property for its models and products until 2032, but the license will now be non-exclusive. Microsoft Corporation will also no longer pay revenue shares to OpenAI, but until 2030, regardless of the progress of OpenAI's technology, Microsoft Corporation will receive revenue shares from OpenAI. Finally, the Windows manufacturer adds that it remains a major shareholder of OpenAI. Microsoft Corporation is scheduled to release its third-quarter earnings report after market close on April 29th.