OpenAI and Microsoft tensions are reaching a boiling point

Mint

5 hours ago

Tensions between OpenAI and Microsoft over the future of their famed AI partnership are flaring up.
OpenAI wants to loosen Microsoft's grip on its AI products and computing resources, and secure the tech giant's blessing for its conversion into a for-profit company. Microsoft's approval of the conversion is key to OpenAI's ability to raise more money and go public.
But the negotiations have been so difficult that in recent weeks, OpenAI's executives have discussed what they view as a nuclear option: accusing Microsoft of anticompetitive behavior during their partnership, people familiar with the matter said. That effort could involve seeking federal regulatory review of the terms of the contract for potential violations of antitrust law, as well as a public campaign, the people said.
Such a move could threaten the companies' six-year-old relationship, widely seen as one of the most successful partnerships in tech history. For years, Microsoft fueled OpenAI's rise in exchange for early access to its technology, but the two sides have since turned into competitors, making it more difficult to find common ground.
'We have a long-term, productive partnership that has delivered amazing AI tools for everyone," representatives for the two companies said in a joint statement. 'Talks are ongoing and we are optimistic we will continue to build together for years to come."
OpenAI and Microsoft are at a standoff over the terms of the startup's $3 billion acquisition of the coding startup Windsurf, the people said. Microsoft currently has access to all of OpenAI's IP, according to their agreement. It offers its own AI coding product, GitHub Copilot, that competes with OpenAI. OpenAI doesn't want Microsoft to have access to Windsurf's intellectual property.
OpenAI has a content-licensing deal with The Wall Street Journal's parent company, News Corp.
The companies continue to be at odds over how much of OpenAI Microsoft would own if it converts into a public-benefit corporation. Microsoft is currently asking for a larger stake in the new company than OpenAI is willing to give, people familiar with the matter said.
OpenAI has to complete the conversion by the end of the year, or it risks losing $20 billion in funding.
Under the Biden administration, the Federal Trade Commission opened a broad antitrust investigation into Microsoft last year. It also examined Microsoft's investment in OpenAI, alongside other big tech investments into AI more than a year ago.
Microsoft first invested $1 billion into OpenAI in 2019. Under the current contract, the tech giant has the exclusive right to sell OpenAI's software tools through its Azure cloud and has preferred access to the startup's technology. Microsoft is also supposed to be OpenAI's only compute provider, though it allowed the startup to create its own data-center project, Stargate, last year.
The two now compete on products ranging from consumer chatbots to AI tools for businesses. Last year, Microsoft CEO Satya Nadella hired a rival of Open AI CEO Sam Altman's who launched a secret effort to build models for Microsoft.
The startup is trying to renegotiate elements of that deal alongside its planned conversion. It wants to join with other cloud providers so it can sell its technology to more customers and access additional computing resources. Microsoft, meanwhile, wants access to OpenAI's technology even after the startup declares its models have achieved humanlike intelligence, which would end the current partnership.
That level of sophistication, known as 'artificial general intelligence," is the subject of fierce debate among technology executives. Some believe it is possible and imminent, while others believe it is far off or potentially out of reach and that AI improvements are likely to be incremental.
Write to Berber Jin at [e-mail]