Microsoft eyes life after OpenAI

Microsoft is looking for ways to reduce its reliance on OpenAI as the partnership that helped define the current AI market becomes more expensive and more contested. Reuters reported on May 13 that Microsoft has been shopping for artificial-intelligence startups and weighing acquisitions as it prepares for a future less tied to OpenAI, citing five people familiar with the matter. In parallel, testimony in Elon Musk’s lawsuit against Sam Altman and OpenAI has exposed how long Microsoft’s concern about dependence on OpenAI has been building. Bloomberg reported that Microsoft has spent more than $100 billion on the partnership to date, a figure disclosed in court by Microsoft executive Michael Wetter. ### What did Microsoft actually do? Reuters reported that Microsoft has been shopping for AI startups and discussing potential deals that could give it both model-building talent and alternatives to OpenAI’s technology stack. Three people familiar with the matter told Reuters the effort could help Microsoft meet its stated goal of building a cutting-edge AI model by next year. (money.usnews.com) The Reuters report said Microsoft had held discussions with Inception, a startup focused on large language models, and had also considered a deal for coding startup Cursor before that company pursued other options. The report described the effort as part of a broader search for optionality as Microsoft balances its own AI ambitions with the commercial limits of depending on a single outside model provider. (money.usnews.com) ### What did the court testimony reveal about Microsoft’s concerns? Satya Nadella’s testimony in the Musk v. Altman trial showed that Microsoft’s unease with the OpenAI relationship predates the current tension. CNBC reported that discovery materials and testimony showed Nadella was worried as early as April 2022 about OpenAI becoming powerful enough to displace Microsoft in the technology hierarchy. (money.usnews.com) GeekWire, citing Nadella’s testimony and internal emails aired in court, reported that Nadella wrote he did not want Microsoft to become “the next IBM” while OpenAI became “the next Microsoft.” Nadella testified that Microsoft was “outsourcing essentially a lot of the core IP development” and taking “a massive dependency on OpenAI,” according to that report. (cnbc.com) ### Where does the $100 billion figure come from? Michael Wetter, a Microsoft corporate development executive, testified that Microsoft has spent more than $100 billion on OpenAI through the current fiscal year ending in June, Bloomberg reported. Bloomberg said the total includes Microsoft’s direct investments as well as the costs of building infrastructure and hosting OpenAI’s computing workloads. (geekwire.com) CNBC separately reported that Wetter described the figure as inclusive of investment commitments, infrastructure and hosting costs. That disclosure offers a rare public measure of the scale of Microsoft’s financial exposure to a partnership that has shaped Azure sales, enterprise AI products and OpenAI’s computing footprint. ### Why is Microsoft looking beyond OpenAI now? (bloomberg.com) May 13 reporting from Reuters said the search for startup deals comes as Microsoft prepares for a future “independent” of what was once a vital partner. Reuters also reported that the company wants to add AI talent and strengthen its in-house model efforts rather than depend entirely on OpenAI for frontier systems. (cnbc.com) The trial record has supplied a second reason. Court disclosures cited by CNBC and GeekWire show Microsoft executives had already been debating how to avoid ceding too much core intellectual-property development to OpenAI, even while expanding the alliance. ### What does this mean for Microsoft’s products and cloud business? Microsoft has built major AI products around OpenAI models, but Reuters’ reporting suggests the company wants more than one source of advanced models inside its stack. (money.usnews.com) That matters because Azure sells AI infrastructure and model access to corporate customers, while Microsoft also embeds generative AI into products such as coding tools and workplace software. Reuters said potential acquisitions could help the company build its own model capabilities and reduce reliance on one partner. (cnbc.com) Bloomberg’s report on the $100 billion total adds a cost dimension to that strategy. The spending figure covers not only equity-style backing but also the infrastructure burden of hosting OpenAI workloads, making the partnership both commercially important and operationally heavy. ### What happens next? The Musk v. Altman case is continuing in federal court in Oakland, according to CourtListener’s docket and multiple trial reports. (money.usnews.com) Additional testimony and exhibits could disclose more about the economics of the Microsoft-OpenAI relationship, including how the companies structured access to models, infrastructure and revenue-sharing. Microsoft, meanwhile, is expected to keep pursuing AI startup talks as it works toward its own next-generation model efforts. (bloomberg.com) Reuters said the company’s deal search is active now, with named startups and internal model goals already part of the discussions. (money.usnews.com) (courtlistener.com)