Once hailed by OpenAI chief Sam Altman as the “best bromance in tech,” the partnership between Microsoft and OpenAI is facing challenges as both companies seek greater independence.
What’s new: Sources inside Microsoft and OpenAI revealed that both companies are working to reduce their reliance on the other, according to The New York Times. Their collaboration, which brought both companies great rewards, is now complicated by demands for resources, friction between leaders, and partnerships with other companies.
How it works: In a series of deals that started in 2019, Microsoft invested a total of $13 billion in OpenAI, giving the startup access to Microsoft’s processing infrastructure and Microsoft special access to OpenAI’s models (which it integrated into its own applications), a large cut of its revenue, and potential equity. Microsoft built a 10,000-GPU system on Azure for training OpenAI models. But OpenAI sought to renegotiate its agreements, while Microsoft continued to develop its own AI capabilities.
- Last year, OpenAI CEO Sam Altman negotiated for further investment from Microsoft. But Microsoft reconsidered its commitment after OpenAI briefly ousted Altman in November. The tech giant’s hesitation strained relations as OpenAI continued to seek more funding and computing power.
- In April, Microsoft hired former Inflection AI CEO Mustafa Suleyman to head up its AI efforts. Suleyman’s aggressive leadership, including his frustration over what he perceived as OpenAI’s slow progress delivering new technologies, raised tensions between the parties.
- Microsoft engineers reportedly downloaded critical OpenAI software without following protocols the two companies had agreed upon, further straining the relationship.
- In June, Microsoft agreed to an exception in the partnership that allowed OpenAI to cut a $10 billion deal with Oracle for additional computing power. More recently, it cut the price it charged the startup for cloud computing.
- Under the original agreement, Microsoft would lose access to OpenAI’s technologies if the startup were to develop artificial general intelligence (AGI). This clause was intended to prevent commercial exploitation or abuse of emergent AI capabilities. However, it allows OpenAI’s board of directors to declare that the company has achieved AGI, which could enable OpenAI to exit the contract or give it leverage in renegotiations.
Behind the news: OpenAI’s valuation soared to $157 billion with new funding from Nvidia and other investors following a period of mounting financial pressure. The increased valuation gives OpenAI new power in its relationship with Microsoft. Moreover Microsoft holds no seats on its nonprofit board of directors, which limits its influence over strategic decisions at OpenAI despite its significant financial stake in the startup’s for-profit wing.
Why it matters: The Microsoft-OpenAI partnership has reshaped the AI landscape, and shifts in their partnership have an outsized impact on a wide range of research and product development. Their evolving relationship illustrates the challenge of sustaining a close collaboration amid rapidly changing technology. Microsoft provided vital resources that helped OpenAI scale up, while OpenAI’s models enabled Microsoft to keep rivals off-balance as it reinvented products including Bing, Windows, Office, Azure, and its expanding line of Copilots. However, facing fierce competition, both companies need ample flexibility to innovate and adapt.
We’re thinking: Together and separately, Microsoft and OpenAI have done tremendous work to advance the field from research to applications. We hope they can strike a balance that maintains their partnership and fuels their growth.