Microsoft-OpenAI ties shows signs of fraying due to concerns over stability

Microsoft had already pumped $13 bn into OpenAI, and Nadella was initially willing to keep the cash spigot flowing. But after OpenAI's board of directors briefly ousted Altman, Microsoft reconsidered

By Cade Metzmike Isaac & Erin Griffith

Last fall, Sam Altman, OpenAI’s chief executive, asked his counterpart at Microsoft, Satya Nadella, if the tech giant would invest billions of dollars in the start-up.

Microsoft had already pumped $13 billion into OpenAI, and Nadella was initially willing to keep the cash spigot flowing. But after OpenAI’s board of directors briefly ousted Altman last November, Nadella and Microsoft reconsidered, according to four people familiar with the talks who spoke on the condition of anonymity.

Over the next few months, Microsoft wouldn’t budge as OpenAI, which expects to lose $5 billion this year, continued to ask for more money and more computing power to build and run its AI systems.

 

Altman once called OpenAI’s partnership with Microsoft “the best bromance in tech,” but ties  between the companies have started to fray. Financial pressure on OpenAI, concern about its stability and disagreements between employees of the two companies have strained their five-year partnership, according to interviews with 19 people familiar with the relationship between the companies.

That tension demonstrates a key challenge for AI start-ups: They are dependent on the world’s tech giants for money and computing power because those big companies control the massive cloud computing systems the small outfits need to develop AI.

No pairing displays this dynamic better than Microsoft and OpenAI, the maker of the ChatGPT chatbot. When OpenAI got its giant investment from Microsoft, it agreed to an exclusive deal to buy computing power from Microsoft and work closely with the tech giant on new AI.

“We’re deeply grateful for our partnership with Microsoft; the early big bet they took on us and the vast compute resources they’ve provided have been essential to our research breakthroughs, benefiting both companies greatly,” Altman said in a statement Thursday. “We are excited and committed to pursuing our shared vision and achieving even greater things together far into the future.”

Over the last year, OpenAI has been trying to renegotiate the deal to help it secure more computing power and reduce crushing expenses while Microsoft executives have grown concerned that their AI work is too dependent on OpenAI. Nadella has said privately that Altman’s firing in November shocked and concerned him, according to five people with knowledge of his comments.

“We have continued to invest in OpenAI at many discrete points in the partnership,” Scott, Microsoft’s chief technology officer, said in a recent interview.  But in March, Microsoft paid at least $650 million to hire most of the staff from Inflection, an OpenAI competitor. Inflection’s former chief executive and co-founder, Mustafa Suleyman , oversees a new Microsoft group that is working to build AI technologies for consumers based on OpenAI software. He is also  the point person for Microsoft’s effort to build technologies to replace OpenAI services, according to two people familiar with Microsoft’s plans.


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