OpenAI and Microsoft Execs Reportedly Considering the ‘Nuclear Option'

Gizmodo

4 hours ago

OpenAI and Microsoft like to present themselves as the power couple of Silicon Valley, but behind closed doors, it's looking increasingly like a distraught and loveless marriage. The two companies, which are bound together by cash flows and an entwined product base, have been undergoing a turbulent negotiation surrounding OpenAI's desire for a shorter leash and the opportunity to turn itself into a for-profit company. Microsoft appears to be resistant to some of those goals. Now, a new report claims that the staff at OpenAI have prepped a 'nuclear option,' in case the negotiations do not go the way they want them to.
The Wall Street Journal reports that OpenAI may run to the federal government and accuse Microsoft—its own sugar daddy—of anti-competitive practices. Were this to happen, OpenAI execs claim they would seek a federal regulatory review of the terms of the contract between them and Microsoft, with an eye towards identifying potential antitrust violations. For Microsoft, calling in the antitrust cops could be the most extreme form of betrayal that exists. It's been down that road, picked up the pieces, and become a very different company in the meantime. OpenAI might also launch a media campaign to air the duo's dirty laundry in public.
The two companies have a quite unique relationship that could make such a conflict particularly disastrous. Microsoft doesn't own OpenAI outright, and the startup isn't technically beholden to the software giant. But Microsoft provides the cloud computing infrastructure necessary to fuel OpenAI's tools, and Microsoft earns a large percentage of OpenAI's profits until the startup repays Microsoft's initial investments. After the initial investment is paid, Microsoft will retain a large stake in the company and earn a certain percentage of OpenAI's profits until it hits a cap. But again, because it's not technically owned by Microsoft, OpenAI is still (technically) its own organization.
OpenAI's effort to become a for-profit company is presumably pivotal to its long-term growth strategy—a strategy that could be strangled if Microsoft holds onto it too tightly. The Journal notes that much of the strife between the two companies seems to revolve around Microsoft's continued ownership over large parts of OpenAI's business:
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.
Were OpenAI to actually turn on Microsoft, the resultant corporate battle could be one for the ages—a truly ugly mud fight between two of the most influential companies in Silicon Valley. It's not clear whether we're at that stage yet, however. 'We have a long-term, productive partnership that has delivered amazing AI tools for everyone,' representatives for the two companies told the Wall Street Journal in a joint statement. 'Talks are ongoing, and we are optimistic we will continue to build together for years to come.' Gizmodo reached out to OpenAI and Microsoft for more information.