Microsoft and OpenAI have adjusted their partnership to reduce their dependence on each other amid an escalating global artificial intelligence race, the companies said Monday.
Microsoft, OpenAI’s biggest financial backer, holds a stake in the startup worth more than $135 billion. The tech giant has long held exclusive rights to offer OpenAI technology to other customers in its cloud service, a major draw for its business.
But relations between the companies have soured as OpenAI has grown from a small nonprofit research lab to a start-up that already expects a huge initial public offering this year. OpenAI needed more computing power than Microsoft was willing or able to provide, and it has sought to build partnerships with other cloud computing providers as it competes with rival AI startup Anthropic and others.
Under the new deal announced Monday, Microsoft will retain access to OpenAI’s AI technology licensing until 2032, but will no longer have exclusive rights to those licenses. This will allow OpenAI to collaborate more freely with other companies and seek deals from multiple sources.
OpenAI will lose some of its financial security as it will no longer receive a revenue share from Microsoft when the tech giant uses the startup’s technologies. The companies agreed to first release their technology in Microsoft’s cloud services if “Microsoft cannot and does not choose to support the necessary capabilities.” The start-up then has the right to publish products on other cloud services.
The ability to partner with other technology companies is potentially valuable for OpenAI. A flurry of deals in recent months has created ties between AI labs and the biggest tech companies, each seeking to expand where they can reach customers and get the computing power necessary to develop and operate AI systems. Just last week, Anthropic secured up to $65 billion in additional investment, plus massive computing deals with Amazon and Google.
OpenAI will pay Microsoft a revenue share up to a maximum amount when the tech giant provides OpenAI technologies to businesses and consumers through Microsoft’s cloud services or through other cloud services.
The new deal gives Microsoft more certainty, giving it a share of that revenue through 2030 regardless of how AI develops. It removes complex language that could end those payments if OpenAI claims to have achieved artificial general intelligence, or AGI. This level of technology would theoretically mean that the technology is as capable as the human brain.
Although the two companies have previously changed their arrangements, the new terms seek to resolve lingering tensions surrounding the relationship. Microsoft has also faced investor concerns that it is too dependent on OpenAI, which is still young and has unstable management.
Jury selection is set to begin Monday in a blockbuster trial that will cut to the heart of the relationship between OpenAI and Microsoft. Elon Musk, OpenAI’s first backer when it was a nonprofit, sued the startup and Microsoft in federal court, alleging they breached the agreement to establish the lab by prioritizing commercial interests over the public good. Mr. Musk is seeking more than $150 billion in damages from OpenAI and Microsoft.
Microsoft is also scheduled to report its quarterly earnings on Wednesday.
(The New York Times sued OpenAI and Microsoft in 2023 for copyright infringement of news content related to AI systems. Both companies denied the claims.)
Mr. Musk founded OpenAI as a non-profit organization in 2015 along with Sam Altman and several AI researchers. But Mr Musk parted ways with the company less than three years later after a power struggle. Mr. Altman then attached a for-profit company to the original non-profit organization so that it could raise the huge amount of money needed to build out its technology.
In 2019, Mr. Altman partnered with Microsoft, which agreed to invest an initial $1 billion in the startup to provide the computing power needed to build AI technologies and license them for its own use. Microsoft ended up investing an additional $12 billion in OpenAI.
However, the partnership began to fall apart after OpenAI’s board temporarily ousted Mr. Altman in late 2023, about a year after ChatGPT was released. Microsoft has allowed OpenAI to secure computing power from other cloud providers, including Oracle and startup CoreWeave. OpenAI has also begun to raise funds from other sources both in the United States and abroad.
Late last year, the two companies modified their partnership to allow OpenAI to restructure into a more traditional for-profit company. This would allow OpenAI to go public on Wall Street, which it hopes to do in the coming months.
OpenAI has since signed a major cloud computing deal with Amazon, one of Microsoft’s main competitors. Under the new partnership with Microsoft, OpenAI has more freedom to make similar deals.
