Microsoft shopping early‑stage AI startups to reduce dependence on OpenAI

Microsoft is shopping for early-stage artificial-intelligence startups as it plans for a future less reliant on OpenAI, according to Reuters, which cited five people familiar with the matter. The effort comes as courtroom testimony this week in Oakland laid out how costly and strategically sensitive the OpenAI relationship has become for Microsoft. (money.usnews.com) Microsoft has spent more than $100 billion on the partnership to date, Bloomberg reported, citing testimony from corporate development head Michael Wetter. CNBC separately reported that Chief Executive Satya Nadella told the court Microsoft wanted “real agency at every layer of the stack” as OpenAI became more central to the company’s AI push. (bloomberg.com) (nbcbayarea.com) ### Which startups is Microsoft looking at? Reuters reported on May 13 that Microsoft has been shopping for AI startups and is in discussions with Inception, a company focused on novel large language model development. Three of Reuters’ sources said potential acquisitions could help Microsoft add AI talent and support its goal of building a cutting-edge AI model by next year. Inception is the only startup named in the Reuters report. The company and Microsoft did not publicly announce a deal on May 13, and Reuters said the talks were part of a broader search for targets. (money.usnews.com) ### What did the trial testimony show about Microsoft’s concerns? Satya Nadella testified this week in Musk v. Altman that Microsoft wanted more control as OpenAI’s technology became increasingly important to its products and cloud business, CNBC reported. Nadella said Microsoft needed to ensure it was not only supplying Azure infrastructure to OpenAI but also benefiting from the intellectual property arrangement around the models. (money.usnews.com) GeekWire, citing evidence shown in court, reported that Nadella had warned internally in 2022 that he did not want Microsoft to become “the next IBM” while OpenAI became “the next Microsoft.” That comparison, as reported by GeekWire, underscored Microsoft’s concern that a powerful platform partner could capture more of the long-term value. (money.usnews.com) ### Where does the $100 billion figure come from? Michael Wetter testified that Microsoft’s cumulative spending on the OpenAI partnership has exceeded $100 billion through the current fiscal year ending in June, Bloomberg reported. That total includes Microsoft’s direct investments in OpenAI as well as the cost of building infrastructure and hosting OpenAI computing workloads. (cnbc.com) A Microsoft securities filing cited in follow-on coverage said the company had delivered $11.8 billion of its promised $13 billion to OpenAI as of April 29. The larger $100 billion figure reflects not just equity-style funding but the much broader cost of data centers, chips and cloud capacity tied to the partnership. (geekwire.com) ### What does Microsoft appear to be building instead? Reuters reported that Microsoft wants to build a cutting-edge AI model by next year and is looking at startup deals partly to accelerate that effort. CNBC’s account of the trial also showed Microsoft’s focus on having “agency at every layer of the stack,” a phrase Nadella used to describe control across models, infrastructure and software. (bloomberg.com) Those facts point to a strategy centered on owning more of the model pipeline while still using Azure as the commercial layer for multiple AI systems. Reuters said the acquisition search could help Microsoft stock up on talent, while the testimony described a company trying to avoid dependence on a single outside lab. (cde.news) ### How much has the OpenAI relationship already changed? April 29 filings and subsequent reporting showed Microsoft’s financial commitments to OpenAI continuing even as the companies’ arrangement evolved. Separate recent coverage outside the trial has described changes to exclusivity terms, though the May 13 Reuters report focused on Microsoft’s internal preparation for a more independent path. (money.usnews.com) The courtroom record this week added detail that had not previously been public. CNBC said senior Microsoft executives described early concern about over-reliance on OpenAI, while Bloomberg quantified the scale of that commitment through Wetter’s testimony. (money.usnews.com) ### What happens next? May 14 was set for closing arguments in Musk v. Altman in federal court in Oakland, according to NBC Bay Area’s live trial coverage. Reuters reported that Microsoft’s startup outreach is tied to its goal of producing a top-tier AI model by next year, making any acquisition decisions and internal model milestones the next concrete markers to watch. (nbcbayarea.com) (cnbc.com) (cde.news)