Microsoft and OpenAI forged a close bond. Why it’s now too big to last.
When Microsoft and Openai first came together in 2019, the world’s most powerful artificial intelligence was literally playing games. Alphago from Google’s Deepmind lab was the first machine to defeat human go champions, but we did all. AI was still in the research phase as we know now.
The focus of the venture was Capital’s focus on the cloud and the crypto currency, but Microsoft saw something called Openai in the non-profit AI laboratory, which was just out of the battle of Morarma, who saw Sam Altman dominated Elon Musk. It turned into an soothed structure in which Musk was controlled by a non -profit -oriented board of AI laboratory without billions of dollars. The return of investors was limited to 100 times their shares.
The restructuring cleared Microsoft’s way to invest $ 1 billion in Openai in 2019. These funds fueled the release of Chatgpt in November 2022 – sparking the AI Prairie fire that is still spread. Shortly after that, Microsoft invested more than 10 billion dollars supporting Openai’s rapid expansion. Since then, the invoices have been collected considering the high scaling cost.
At first, the two companies were symbiotic. Openai’s AI information operations are done in Microsoft’s Azure Cloud. Microsoft can access all Openai’s intellectual property, including Microsoft’s Model Catalog that supports various AI services offered by copilot products. When the Openai profit -free organization overturned Altman in the November 2023 coup, Satya Nadella, CEO of Microsoft, supported Altman, a significant approval that helps to restore his mission.
However, the partnership, which makes sense from 2019 to 2023, made each company dependent on the other. Openai has great ambitions, and Sam Altman believes that he will need unprecedented information processing power to reach more there than Microsoft can provide. It also requires more control over the construction of the data center. Altman’s company also has more and more targets alone-Chatgpt subscription and licenses are on the way to bring $ 10 billion a year.
Microsoft rely on Openai as a large customer and a supplier. This is a risk of concentration that should annoy Microsoft managers.
“Openai has become an important new competitor in the Openai technology industry,” said Brad Smith, President of Microsoft in February 2024 blog post. He said. This was the first public opinion that the relationship may not be as comfortable as it was. Microsoft started to work on its AI models that year and refused to participate in a $ 6.6 billion Openai financing tour in October 2024.
In January, Microsoft and Openai changed Microsoft’s agreement with Openai’s private cloud provider anymore, but to provide first refer for all new jobs. Microsoft does not use this right to a large extent – Openai then signed new cloud agreements with Coreweave and Alphabe’s Google Cloud two Microsoft contestants.
With the modification of the agreement on the same January, Altman, President Donald Trump, Oracle President Larry Ellison and Softbank Group CEO Son announced Project Stargate, a large AI Data Centers, which was controlled by Altman. The partnership and the high -profile event clearly stated that Openai was his new friends and went beyond Microsoft Reliance.
The partnership exhibited at the Oval Office led to a $ 40 billion walking tour led by Softbank. However, it came with an attached rope: $ 20 billion is a conditional for Openai to make another re-structuring company by the end of the year, which will give more traditional investor rights to Softbank and other new investors.
However, there are $ 20 billion, including lock obstacles on the way to restructuring and a lawsuit from Elon Musk and California, Delaware and Federal Government. However, the biggest obstacle is that Microsoft has a major share in the current Openai. Openai will have to negotiate new terms to transform corporate structures, and in a marking scenario, Microsoft has all the leverages that grow every day.
According to The Wall Street Journal, negotiations are taking testis. The main point of the contention is how much of the new Openai Microsoft will have. However, Openai also purchases Windsurf, an advanced AI coding tool. In accordance with the current regulations, Microsoft can access the entire IP of Openai, which will include Windsurf. But Openai doesn’t want it, because Microsoft’s own coding assistant is Github Copilot, and it puts these companies on another axis of competition.
In a joint statement, Microsoft and Openai Barron said: “We have a long -term, productive partnership that offers incredible AI tools for everyone. Negotiations continue and we will continue to build together for the coming years.”
According to the magazine, Openai thinks that Microsoft can prevent Microsoft from dragging the negotiations by lobbying to accuse Microsoft an antitröst violations to the public and open an investigation of the White House. Since the Stargate announcement, Altman has had a close relationship with Trump. In this context, the magazine article is a message from Openai: We are not weak here.
The divorce can be ugly that way. Microsoft talks could slowly walk and seek pressure to settle in Openai or lose $ 20 billion as the year at the end of the year. In the meantime, Openai may begin to push the White House arms to encourage a kind of Microsoft investigation that WSJ called the “nuclear option .. However, like any nuclear change, no one is victorious. Microsoft would be Tarred, and Openai would still miss a $ 20 billion deadline.
Since the launch of Chatgpt, the AI Microsoft-Openei alliance has been dominated by the USA. Now it causes the inevitable mountain to struggle to fill the void.
Write to Adam Levine Man.levine@barrons.com
