OpenAI’s long-awaited restructuring deal

What's driving the markets this week? What's on investors' minds as they look ahead? Find out in 10 minutes or less on the Markets Podcast from Goldman Sachs. Listen now. Good morning from the Financial Times. Today is Wednesday, October 29th, and this is your FT News Briefing. OpenAI is pivoting to a new structure.

And Tesla's chair is rallying support for Elon Musk's trillion-dollar pay package. Plus, South Korea's stock market is on a roll this year. We'll hear why investors have changed their tune. I'm Sonia Hudson, and here's the news you need to start your day.

OpenAI has finally completed its contentious restructuring. The ChatGPT maker was founded as a nonprofit and now includes a commercial arm. The restructuring highlighted the internal push and pull between OpenAI's idealistic roots and its need for cash. So now that that saga is over, where does it leave the startup? Here to help us answer that question is the FT's Melissa Haikala. Hi, Melissa. Hi. So give me the details here. What are the highlights of this restructuring deal?

So what this deal does, it creates a for-profit entity called the OpenAI Group, which OpenAI has argued is essential for it to continue raising these massive amounts of money it needs to build and train its models, right? It allows investors to also hold equity in the company. And controlling that for-profit entity is a non-profit called the OpenAI Foundation. All right, so the for-profit entity is raising money. What will the nonprofit arm do? So the nonprofit will focus on things like...

funding research on healthcare and curing diseases, and technical solutions for AI resilience, which is making AI models more robust. But the nonprofit will also be charged in holding the for-profit entity accountable for OpenAI's mission. which is to ensure artificial general intelligence, meaning systems that surpass most human intelligence, benefits humanity. And the main tool it has to do this is by hiring and firing board directors.

Sam Oldman, the chief executive of OpenAI, will sit on both boards initially. Okay, so this is kind of a compromise between these commercial ambitions and wanting to stay true to that original OpenAI mission. There's another piece to this that we haven't mentioned yet, which is how... how the restructuring is dealing with OpenAI's biggest investor, Microsoft. What can you tell us about that? So Microsoft has been an early investor in the company, and they've poured billions into OpenAI.

with the expectation that they would then get access to the company's cutting-edge technology. And so this deal will give Microsoft a 27% stake in the startup and also intellectual property rights to their models and products until 2032. as well as the research underlying or underpinning the technology until 2030. Yeah, so what does this restructuring mean for the future of open AI?

OpenAI has been leading the frontier of AI research. Their models are the most powerful, the most impressive. And so by being able to do this deal, they can now... push the frontier forward and give us the next generation of super powerful AI tools. But it also means that they're going for a more commercial applied approach, right? Like now we're going to see AI models that aren't just in the lab, aren't just research previews, but are actually being applied into our day-to-day lives.

in a way that is meant to bring in profits. And what does the future of open AI mean for the field of artificial intelligence in general? I mean, it's both exciting and kind of scary because on one hand, you know, we might see something new and exciting now that they have access to more money, more compute, more scale.

And some people have been saying that OpenAI's latest model, GPT-5, was a bit of a letdown and didn't really show us anything new. And so maybe this will lead to some new technical breakthroughs that'll get people excited. On the other hand, we're seeing this extreme concentration of power and these models, AI companies using our sensitive data to sell ads, for example. So it really is...

It's a big shift for the AI industry and where we're going and what kind of technology and why we're building it. Melissa Heikela is the FT's AI correspondent. Thanks, Melissa. Thank you.

Tesla's chair had a stark warning for shareholders. CEO Elon Musk could quit if you don't approve his $1 trillion pay package. And if he does leave, there's no one good enough to replace him. Chair Robin Denholm and other board members are meeting with the company's biggest institutional investors this week. Shareholders are voting on the pay plan next Thursday. Denholm has not, however, explained Tesla's contingency plan if the pay proposal gets rejected.

Foreign investors are returning to South Korea's stock market after a rough few years. In fact, it's become the world's best-performing major market this year. So what's driving the recovery? I'm joined by the FT's William Sanlon to find out. Hi, Will. Hi, Sonia. All right, so until recently, South Korea's stock market had been just in the doldrums. What changed?

So it's underperformed the S&P 500 for a number of years. And you can see this as well in the valuation of Korean companies, the average price-to-book ratio of South Korea's benchmark stock index, the COSPI. was below one for a number of years. That means that investors thought that the value of these companies was less than the sum of their assets.

South Korea's KOSPI is up over 60% this year, making it the world's best performing major stock index. Well, what's behind this change of heart from investors? Well, the big thing is that this year there's been this massive AI theme across different companies and valuations in the U.S. have risen so much that investors now are looking for companies. down the supply chain. And South Korea has two of the best choices for this in SK Hynix and Samsung Electronics.

So they make a lot of semiconductors and in particular something called high bandwidth memory chips, which are needed for AI. Are there other factors that have also begun to lure investors back? Yes. I mean, the big one is also there's an ongoing campaign by the government to improve stock market valuations and corporate governance for Korean companies. They have a committee called the KOSPI 5000.

That's been set up by a number of lawmakers to try and boost the stock market and improve things like cross-shareholdings and try and make Korean companies more investable. Apart from AI and electronics, are there any other sectors that have been benefiting from this renewed investor interest? Yeah, there's been pretty significant increases across different sectors. Some of the other areas people are very excited about include defense, shipbuilding, and energy storage. In defense, we have...

a company called Hanwha Aerospace, which is South Korea's largest defense manufacturer. It's done extremely well this year. In shipbuilding, we have a company called HD Hyundai Heavy Industries. which is South Korea's largest shipbuilder. And as countries in the West look to rearm, as geopolitical tension mounts, they've benefited hugely from things like...

demand for more artillery shells, or in the U.S. instance, they expect this kind of buildup of the Navy to compete with China. And finally, we have LG Energy Solution. which is the world's third largest battery producer, which has jumped over 40% just this month. This company is seeing lots of demand from the U.S. due to interest in energy storage for AI servers.

So, Will, what's the next thing that we should be looking out for that could potentially move the South Korean stock market? Analysts think that there's the potential for more foreign money to flow into Korea. There's also growing hope of a trade deal with President Trump visiting Korea this week. And that could also boost sentiment for the market. And then one final kind of ironic thing is that...

Analysts don't think that Korea's retail investors, like any retail investor, very attracted to momentum have really been behind this rally in a meaningful way. This has been primarily driven by domestic institutional money and foreign investors. So with the kind of momentum that we're seeing, it's possible that they finally jump in. William Sandland is the FT's Asia Markets correspondent.

Thanks, Will. No worries. You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News briefing. Check back tomorrow for the latest business news. If you love to travel, Capital One has a rewards credit card that's perfect for you. With the Capital One Venture X card, you earn unlimited double miles on everything you buy. Plus, you get premium benefits at a collection of luxury hotels when you book on Capital One Travel.

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