The move ensures Microsoft’s dominance in the AI industry and deepens its lead over rivals like Google.
Microsoft’s shares rose, adding nearly $30 billion to its market value.
Altman will lead a new research team at Microsoft, joined by other OpenAI cofounders and researchers.
About 500 OpenAI employees threatened to leave unless the board reinstated Altman, but Microsoft assured them of positions at the new subsidiary.
Concerns over governance and impact on staff payouts led to an expected employee exodus from OpenAI.
The Altman-led team at Microsoft will have more access to computing power necessary for future products.
OpenAI’s planned share sale at an $86 billion valuation is unlikely to happen.