OpenAI Careens Toward Messy Divorce From Microsoft

Quick, someone call TMZ: There’s an even messier celebrity breakup than Trump-Musk with countless billions at stake.

Relations between OpenAI and its largest investor, Microsoft, are continuing to fray as the ascendant artificial intelligence firm struggles to get approval from its investor on the fine points of reorganizing into a for-profit public benefit corporation. According to a report in The Wall Street Journal last week, OpenAI is now even considering a “nuclear option” to sever ties for good.

Lover’s Quarrel

At the heart of the matter is how large a stake Microsoft will own in OpenAI’s public benefit corporation, a subsidiary of the ChatGPT maker that will still be controlled by the nonprofit parent. According to a recent Reuters report, OpenAI wants the Big Tech player to hold a 33% stake while relinquishing its rights to future profits. Microsoft hasn’t agreed, and the two sides are at loggerheads over the matter, though it’s far from their first fight.

Microsoft already loosened its grip on the AI firm in January, allowing some key terms of their agreement to change so that OpenAI could tap data centers outside of the Microsoft Azure infrastructure. That resulted in “Stargate,” a high-profile $500 million data center joint venture between OpenAI, Softbank, and Oracle (with Microsoft, Nvidia, and Arm serving as “technology partners”). But opening the door to more independence may be objectionable to Microsoft: Earlier this month, Reuters reported OpenAI is now planning to tap Google’s cloud services to meet its growing need for computing capacity. In another line-crossing move, The Information reported last week that OpenAI has been offering a suite of ChatGPT enterprise tools at discounts of up to 20%, directly undercutting sales of competing Microsoft services like Copilot.

In other words, tensions are at an all-time high, and now both sides are throwing around fighting words at a time when level-headed communication is crucial:

• According to the WSJ, OpenAI executives have discussed a “nuclear option” of formally accusing Microsoft of antitrust violations if it can’t come to an agreement with the Windows-maker over transition terms.
• According to a Financial Times report published Wednesday, Microsoft is prepared to walk away from negotiations altogether and simply ride out its existing commercial contract with OpenAI, which is set to last until 2030. That would leave OpenAI stuck with its current structure, which means it’d lose out on half of the $40 billion investment SoftBank committed to making in April, which was contingent on a successful restructuring to for-profit by the end of the year.

Burn Book: Microsoft isn’t the only Big Tech firm OpenAI has waded into a blood feud with. The company now finds itself openly at war with Meta, which is offering $100 million signing bonuses to poach OpenAI talent as it seeks to bolster its AI efforts. OpenAI founder Sam Altman last week jabbed back by saying, “I don’t think that [Meta’s] great at innovation.” At this rate, we have to imagine Altman isn’t exactly the most popular player at our imagined weekly poker night among Silicon Valley bigwigs (actually, let’s be honest, they’re probably playing Magic: The Gathering).