OpenAI is accelerating its global expansion by opening new offices in Australia, Brazil, and Asia, targeting enterprise customers and seeking to sell its products directly rather than through Microsoft. CNBC's MacKenzie Sigalos joins 'Squawk on the Street' with the latest.

The release of Open AI's ChatGPT has accelerated the development of artificial intelligence and warnings about its impact on society.

Rise of AI

OpenAI is accelerating its global expansion by opening new offices in Australia, Brazil, and Asia, targeting enterprise customers and seeking to sell its products directly rather than through Microsoft. This move is part of a broader strategy to increase revenue share and build a larger go-to-market team, which has grown significantly in recent months.

The expansion comes amid ongoing renegotiations with Microsoft over revenue sharing and commercial terms, as well as discussions about OpenAI's ownership structure and cloud provider partnerships. OpenAI is also considering diversifying its cloud partnerships beyond Microsoft Azure, including a recent deal with Google Cloud, and is restructuring as a public benefit corporation.

OpenAI accelerates expansion to win enterprise deals from customers

OpenAI expanding its global footprint. It's opening new offices in Australia and Brazil. Mackenzie Sagalas has more on this very fast expansion. Mackenzie. Hey there, David. So Brazil is OpenAI's fastest growing market in Latin America, and now it's home to its first office in the region. It's also expanding an Asia pack with new hubs in Sydney and New Delhi. And the goal here is really to win enterprise customers and take more control of deals that once ran through Microsoft, its biggest partner and investor. Because by selling these products directly to customers, the 80-20 revenue share with Microsoft tilts in OpenAI's favor. And that's fueled a rapid buildout of their go-to-market team from about 50 people just 18 months ago to more than 700 today under COO Brad Lightcap. Now the turning point came in 2023 with the launch of GBT4 and its first SaaS product, ChatGBT Enterprise. Now the OpenAI COO told me that was the first time you crossed the chasm of the models being intelligent enough to actually solve problems for businesses. Now what Microsoft offers customers is ease of access. Companies that already use other enterprise tools through Azure can tack on OpenAI's tech. But what they get when they buy directly from OpenAI is direct access to the research team that's actually building these frontier models. So now as OpenAI plants new flags abroad, the real tension is at home as it renegotiates the terms of its Microsoft partnership, including that revenue share for enterprise sales. And remember, guys, it was just last August that Microsoft actually labeled OpenAI a competitor in an SEC filing, which is when these tensions really started to surface. Yeah, Mackenzie, it's a fascinating relationship. And as you point out, it's under significant tension and change. Obviously, this is not an easy thing for them because they're, that is, OpenAI is changing the entire ownership structure of the company as they move to a different type entity at this point. And SoftBank, obviously, also, as you well know, a very important investor for them. And so much of the new capital, depending on what they come to, you know, be very interesting to see where they end up with Microsoft in terms of a new agreement of some kind and or sort of how they're going to deal with the new ownership structure if and when they get there. Well, exactly. And so this revenue share is pretty far down the list of things that they're renegotiating at this point. Top of that list, at least from the OpenAI side, is looking to have more diversity of access to these cloud providers potentially selling their enterprise products through others besides Azure. They do have some diversity now with that Google Cloud deal. And also at stake, as you mentioned, is this massive restructure to a public benefit corporation. And as part of that, talking about what Microsoft's equity stake will be right now, it's roughly in that range of 30 to 35 percent. They're also renegotiating the terms of their commercial contract with Microsoft. And so there's give and take, even though these are very separate discussions. Indeed. And obviously, a potential customer is going to have to think long and hard about which service, I guess, if he takes sides or not. And Mackenzie, fascinating, intriguing wrinkle. Mackenzie Segalos.

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OpenAI accelerates expansion to win enterprise deals from customers

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