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The rumoured split between the ChatGPT creator and Redmond would mark a major deterioration in relations between the two firms as the former contemplates an IPO.
OpenAI could seek federal regulatory review of its contractual terms with Microsoft. (Photo: LanKS/Shutterstock)
Executives at OpenAI are reportedly considering petitioning the US government for a regulatory review of its contract with Microsoft. The move, first reported by the Wall Street Journal, would mark a startling deterioration of relations between the ChatGPT creator and Redmond, a partnership which has seen the former rely heavily to date on the latter’s compute and financial resources. According to the WSJ, OpenAI would seek the review on the basis that Microsoft could have violated antitrust law in its dealings with the company.
The two firms have been engaged in prolonged negotiations as OpenAI seeks Microsoft’s support to transition into a public-benefit entity. Despite months of discussions, a consensus has yet to be reached on crucial aspects of their partnership. Central to these talks is the restructuring of Microsoft’s investment terms and its future equity stake in OpenAI.
Reports indicate that adjustments are being made to accommodate OpenAI’s prospective initial public offering (IPO) while safeguarding Microsoft’s access to leading AI models. Microsoft seems prepared to relinquish some equity in exchange for extended technological access beyond 2030.
“We have a long-term, productive partnership that has delivered amazing AI tools for everyone,” said representatives for the two firms in a joint statement. “Talks are ongoing and we are optimistic we will continue to build together for years to come.”
Revenue sharing model and strategic restructuring plans
Part of the ongoing discussions involves amending the broader contractual agreement established after Microsoft’s initial $1bn investment in OpenAI in 2019. As part of strategic restructuring efforts, OpenAI plans to reduce Microsoft’s revenue share from 20% to at least 10% by the end of the decade. These changes aim to enhance the influence of OpenAI’s nonprofit parent entity, potentially affecting CEO Sam Altman’s control over strategic decisions. Currently, Microsoft benefits from revenue-sharing that allows access to OpenAI’s AI models integrated into Azure cloud services and other applications.
In March, OpenAI awarded a $11.9bn contract to CoreWeave to enhance its AI infrastructure for global distribution. Although Microsoft remains a significant supporter through revenue-sharing agreements, it has lost exclusivity as OpenAI’s cloud provider due to new arrangements between the ChatGPT creator, SoftBank and Oracle. Concurrently, Microsoft has been advancing its own AI models under the MAI brand, intensifying competition with OpenAI.
Discussions are reportedly underway for a restructuring that would see Microsoft hold a 33% stake in exchange for relinquishing future profit rights. Talks continue as both companies negotiate amendments to clauses providing Microsoft exclusive rights to host OpenAI models on its cloud platform.
Additionally, OpenAI has reportedly entered into a partnership with Google Cloud to diversify its computing resources amid rising demand for computational capacity required for training and deploying AI models. This agreement underscores the significant computing power needed by the AI startup and marks another step away from dependence on Microsoft’s Azure cloud service.
