Microsoft’s fortuitous entry into the OpenAI technology circle has been largely discounted. It is not a divorce or a complete separation. More like that, the most important artificial intelligence partnership is now getting stronger with other clouds.
In the field of technology, that’s a big deal. For years, Microsoft’s initial investment in OpenAI helped make Azure one of the cornerstones of the artificial intelligence boom. Now it may have to allow some of its customers to visit other roads.
Microsoft will not be fully integrated. Far from it. OpenAI’s press release describing the new chapter of the partnership made it clear that Microsoft will still be its main cloud service provider, and its products will still be launched on Azure first for many use cases, and Microsoft will continue to maintain a license to use OpenAI models and products until 2032.
What is the difference? That license is now non-exclusive. Microsoft can still open doors. It will no longer be able to lock them.
Not everyone caught the words. “The markets reacted quickly.” Microsoft stock fell about 3% after the news, while Alphabet and Amazon rose slightly, Reuters said. It would be easy to dismiss that as a knee-jerk market reaction, but it wasn’t.
The market, like everyone else, had the same take: if OpenAI had been allowed to sell cloud platforms outside of Microsoft, the fight for AI dominance would have gone from a single file march led by Microsoft to an open elbow competition.
Microsoft, on the other hand, has framed the move as more transparent than retroactive. “In its blog post on the revised OpenAI agreement, Microsoft wrote,” the company “will no longer pay a dividend to OpenAI, while payments to Microsoft will be contingent and permanent until 2030.” So the cap is still there.
It suggests that Microsoft may be trading only on pure economics and a long-term contribution to the growth of OpenAI. It’s not really a loss of exclusivity in the traditional sense, but rather Microsoft deciding that it can always play a larger role in that conversation rather than being the entire host.
What also stands out here is time. OpenAI is currently at the center of a regulatory and legal storm, with Elon Musk’s lawsuit against OpenAI CEO Sam Altman rekindling discussions about the purpose of the company’s founding.
Was OpenAI started with a humanitarian goal, or is this just another big Silicon Valley company looking to grow, profit, and rule over everything? That argument has been around for a long time, but the Microsoft deal is fueling the debate.
This is not the only cause for concern, either. OpenAI is very computing intensive, and even a single large cloud partner like Microsoft may not be enough to service all of its needs.
Training and deploying the next models will require data centers, processors, electricity, engineering talent and a frankly obscene amount of money.
So, this deal gives OpenAI even the commercial wiggle room it so desperately craves. But it’s also a vision of a possible reality, where all this AI bonanza is too big, too expensive and too powerful for a single infrastructure to endure for the long term.
The bigger story is how OpenAI grew from a research lab pet to one of the most powerful, and powerful, companies in technology. That change has already raised concerns about ownership, purpose and profitability, as reported about OpenAI’s recent change to a limited public benefit company.
With this latest news, a new wrinkle is added: OpenAI gains even greater autonomy, though Microsoft retains enough power to remain relevant to whatever comes next.
Who comes out victorious in this? It really comes down to who is in the scenes. OpenAI gains more flexibility, while Amazon and Google may gain a wedge. Although Microsoft’s exclusive status has been revoked, it still retains its access and influence, along with the OpenAI stack.
Customers may be able to enjoy more options, but it will really depend on whether cloud providers can avoid this situation by combining complex pricing structures with good terms. Ultimately, what we know for a fact is that technology has become a confusing place again.
Microsoft is still a friend of OpenAI, however its limits are much smaller. In the world of technology, if you break down any wall, it’s safe to say that your competitors usually don’t stand to tell. They flew over the road.