Microsoft and OpenAI Clash

Microsoft is considering dropping negotiations with OpenAI after disagreements over OpenAI’s aim for profit. The $300 billion AI start-up can’t agree with the software giant over future stake and its plans. Under current agreements, Microsoft would retain access to OpenAI’s technology through an existing contract until 2030, unless a better offer comes across. This deal would allow OpenAI to move into a more conventional corporate structure, which would allow for more funding and potentially an IPO.

Since its initial contract, Microsoft has invested over $13 billion in the company. In 2019, it invested roughly $1 billion, sparking their relationship. Microsoft has exclusive rights to sell access to models, and it receives a 20% share of all revenues up to $92 billion. Despite this, Microsoft is reluctant to lose ground on access to tech and revenues. Microsoft also holds a strong position, as they believe that OpenAI may not be the only frontrunner, and that leading models may become commoditized. This has been shown through its diversification away from OpenAI models in the past months.

These tensions have been reaching a boiling point. An OpenAI executive has discussed what is considered a nuclear option. This is accusing Microsoft of anticompetitive behavior during their partnership. This would mean beginning a federal investigation into the contract terms and determining whether or not they violate antitrust laws. This could seriously harm their existing contract and potentially cause them to miss out on billions of dollars of funding. The FTC has investigated Microsoft and its investors but hasn’t found anything yet.