Things are getting tense between Microsoft and OpenAI

Tensions between executives at OpenAI and Microsoft have reached a boiling point, with those on OpenAI’s side weighing whether to accuse Microsoft of anticompetitive behavior.

That’s the picture that emerges from a Wall Street Journal report published Tuesday. The report details mounting frustration inside OpenAI as negotiations drag on over the future of the two companies’ AI partnership, including how big a stake in OpenAI Microsoft would receive if the ChatGPT maker converts into a public-benefit company (a for-profit company with both business and social goals).

Such a conversion is crucial for OpenAI’s ambitions to raise more funding and potentially go public. But that’s also the very pricey sticking point. If OpenAI doesn't accomplish the conversion by the end of the year, a lead investor, SoftBank, may withdraw $20 billion in funding. And OpenAI's ability to pull off the conversion hinges on Microsoft's blessing, per the current agreement.

OpenAI execs mull public campaign

Negotiations have reportedly soured to the point where OpenAI leaders have discussed launching a public campaign and calling for federal regulators to scrutinize the partnership’s terms under antitrust law. Microsoft was recently under investigation by the FTC for separate potential antitrust violations, and has a longer history with antitrust measures.

OpenAI has taken no official action, but that it’s been discussed is in some ways enough: a whiff of war in the air. An anticompetitive accusation and public campaign would be likely to seriously alter what’s become one of the tech world’s most important and prominent partnerships.

Microsoft first invested $1 billion in OpenAI in 2019, with the original announcement painting the partnership in idealistic tones. Microsoft and OpenAI pledged to jointly develop “a computational platform in Azure of unprecedented scale,” one that would train and run ever more advanced AI models.

The companies said the project would reflect their “shared principles on ethics and trust”—a line that now reads with an iota of irony as the partnership strains under the weight of multi-billion-dollar disputes and competing ambitions.

In all, the original announcement refers to “trust” and “trustworthiness” four different times.

Rift reportedly deepens over IP access

Since 2019, Microsoft has invested billions more. It enjoys exclusive rights to sell OpenAI products through Azure, plus preferred access to its technology. That may be one more sticking point: According to the WSJ, OpenAI wants to protect the IP of its newly acquired coding startup Windsurf, barring Microsoft from accessing that IP.

The dispute also touches on a longer-term rift: Microsoft wants access to OpenAI’s technology even after it reaches "humanlike intelligence," a milestone that would terminate the current agreement.

In a joint statement to WSJ, the companies said talks are ongoing and characterized the partnership as “productive.” A high-stakes tech alliance like theirs could hardly fail to be contentious, too, with so much risk and reward in play.