Recent reports from the Wall Street Journal and the New York Times indicate that the close ties between Microsoft and OpenAI are becoming undone, as conflicts emerge between employees and leadership at the two companies, and tense negotiations are playing out over the former’s future equity in the A.I. startup as it shifts from a nonprofit organization to a for-profit company. OpenAI founder Sam Altman once called their relationship with Microsoft the “best bromance in tech.”
The relationship between the two companies is complex, not a simple case of the larger company buying up the smaller one outright. Microsoft has invested $13.75 billion into Sam Altman’s startup since 2019, including in a recent funding round that netted OpenAI $6.6 billion and a $157 billion valuation. OpenAI in turn exclusively has bought cloud computing power exclusively from Microsoft and has partnered with them in further work on new A.I. The Times reports that Microsoft has been holding out on further funds and computing power, as CEO Satya Nadella was “shocked and concerned” when OpenAI’s board briefly ousted Sam Altman as CEO last November, who negotiated his way back into the seat within five days. In the meantime, OpenAI negotiated an exception to its exclusivity deal with Microsoft, allowing the company to make a deal to use Oracle’s servers running Microsoft’s software.
Beyond declining to provide additional resources to the startup, the Times also reports that Microsoft essentially absorbed a competing A.I. firm called Inflection, paying $650 million to buy up most of its staff. According to their sources, its cofounder, Mustafa Suleyman, is currently spearheading Microsoft’s effort to “replace what the company is getting from OpenAI.” Suleyman and his engineers work directly with OpenAI employees, who have reported difficulties and conflicts while working with them. Executives and employees, including Sam Altman, are reportedly “angered” by Suleyman’s place at Microsoft.
Another source of friction is the question of Microsoft’s continuing stake in OpenAI, as the startup announced last month that it would be transitioning from a nonprofit organization to a for-profit company. This has brought about tense negotiations over Microsoft’s equity and broader role in that future entity. The Wall Street Journal reports that both companies have hired investment banks to advise them on the transition, calling it a “sign of how significant the outcome [of the negotiations] will be.” Microsoft has hired Morgan Stanley, while OpenAI has brought in Goldman Sachs along with former Citigroup banker Michale Klein, who has partnered with Altman on a nuclear power startup called Oklo.
Microsoft and OpenAI have yet to comment on the claims published by the Journal and the Times.
