OpenAI executives have reportedly considered accusing Microsoft, its key financial partner, of anticompetitive behavior within their partnership, according to a Monday report from the Wall Street Journal, which cited people familiar with the matter.
The report said OpenAI could potentially seek a federal antitrust review of the contract terms it has with Microsoft, and may also launch a public campaign around the issue.
Such a step could put one of the most influential partnerships in the booming artificial intelligence industry at risk.
OpenAI still requires Microsoft’s approval to finalize its transition into a public-benefit corporation. However, after months of discussions, the two companies remain at odds over key details, sources told the Journal.
Among the sticking points are the terms of Microsoft’s investment and the future equity stake it would hold in a restructured OpenAI, sources said.
Separately, The Information reported that OpenAI is proposing Microsoft hold a 33% stake in a reorganized unit in exchange for giving up rights to future profits, citing someone who spoke with OpenAI leadership.
The same report noted that OpenAI wants to amend provisions that currently grant Microsoft exclusive rights to host OpenAI models on its cloud infrastructure.
So far, Microsoft has not agreed to those terms and is said to be asking for additional concessions, according to The Information.
“Talks are ongoing and we are optimistic we will continue to build together for years to come,” the companies told Reuters in a joint statement.
Microsoft’s relationship with OpenAI began in 2019 with a $1 billion investment aimed at advancing AI technologies on the Azure cloud platform.
But OpenAI has increasingly looked to reduce its dependency on the tech giant. As reported earlier this month by Reuters, the company is preparing to incorporate Alphabet’s Google Cloud to help meet growing compute demands.
OpenAI also announced Monday that the U.S. Department of Defense awarded it a contract worth up to $200 million. Under the deal, OpenAI will help the agency prototype systems that use its frontier models for various administrative functions and beyond.
OpenAI listed several use cases, including assisting service members in accessing healthcare, improving data efficiency across programs, and “supporting proactive cyber defense.” The company emphasized that “All use cases must be consistent with OpenAI’s usage policies and guidelines.”
The DoD’s language was more direct, stating, “Under this award, the performer will develop prototype frontier AI capabilities to address critical national security challenges in both warfighting and enterprise domains.”
It’s unclear whether that reference to “warfighting” pertains to weapons development or more administrative aspects of military operations. OpenAI’s guidelines prohibit individuals from using ChatGPT or its APIs to develop or deploy weapons. However, the company removed its explicit ban on “military and warfare” applications from its terms of service in January 2024.
Given growing concern among Silicon Valley leaders over China’s progress in AI, the DoD’s interest in leveraging OpenAI’s technology isn’t unexpected. Venture capitalist Marc Andreessen — co-founder of Andreessen Horowitz and an OpenAI investor — recently described the competition between Chinese and Western LLMs as a “cold war” on the podcast Uncapped, hosted by Jack Altman, the brother of OpenAI CEO Sam Altman.
Still, the dynamics between OpenAI and Microsoft are becoming more complicated.
Microsoft has maintained thousands of contracts with the U.S. government over the years, including significant deals with the DoD. The company has long built out the robust security frameworks necessary for serving federal clients, particularly the defense sector.
Yet Microsoft only announced in April that its Azure OpenAI Service had been cleared for use at all classified levels by the DoD. Now, the Pentagon is also working directly with OpenAI — a move that underscores the startup’s growing independence. From Microsoft’s point of view: Ouch.
Neither OpenAI nor Microsoft immediately responded to a request for comment.
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