Microsoft hunts AI startups

Microsoft is looking at artificial-intelligence startup acquisitions as it tries to build more of its own model capability while reshaping a partnership that helped define the current AI boom. Reuters reported on May 13 that the company had weighed deals including code-generation startup Cursor and was in talks with Inception, a startup founded in 2024 by a Stanford University team. The talks come after fresh disclosures in Elon Musk’s lawsuit against OpenAI and Microsoft put new attention on the scale of Microsoft’s spending and expected returns from the alliance. They also come weeks after Microsoft and OpenAI rewrote key terms of their relationship. ### Why is Microsoft looking for deals now? Reuters reported on May 13 that Microsoft is shopping for AI startups as it prepares for a future “independent” of OpenAI, citing five people familiar with the matter. Three of those people said the potential acquisitions could help Microsoft add research talent and support its stated goal of building a cutting-edge AI model by next year. April 27 brought a formal reset in the OpenAI relationship. OpenAI and Microsoft said that day that Microsoft would remain OpenAI’s primary cloud provider, but OpenAI would be able to serve all of its products across any cloud provider, including Amazon and Google. The companies also said Microsoft’s license to OpenAI model IP would continue through 2032 and would no longer be exclusive. (money.usnews.com) ### What did the court disclosures show about the economics? Bloomberg reported on May 11 that internal Microsoft planning documents disclosed in court showed the company had targeted a $92 billion return on its early OpenAI investments. Chief Executive Satya Nadella testified that the investments “worked out well because we took the risk,” according to Bloomberg’s account of the trial. (cnbc.com) The Information reported this week that Microsoft had generated more than $30 billion in revenue from OpenAI-related business. Separate trial-related coverage, including reports citing Microsoft executive testimony, said Microsoft’s spending tied to the partnership had topped $100 billion, including infrastructure and hosting costs. Reuters did not independently publish those figures in the deal story, but the numbers have circulated widely through trial coverage. (bloomberg.com) ### Which startups are in play? Inception is the clearest named target in current reporting. Reuters said Microsoft is in discussions with the startup, which focuses on a different method of developing large language models, and that Microsoft’s venture fund M12 invested in Inception’s $50 million seed round in late 2025. Reuters said the discussions were ongoing and might not result in a deal. (theinformation.com) Cursor was an earlier option. Reuters reported that Microsoft weighed acquiring the coding startup this spring before walking away, and that SpaceX later announced a deal with Cursor after Microsoft stepped back. Reuters also said SpaceX had courted Inception and that Inception recently hired a bank to help negotiate a transaction at a price above $1 billion. (money.usnews.com) ### What changed in the OpenAI-Microsoft contract? OpenAI and Microsoft announced on April 27 that OpenAI would keep paying Microsoft a revenue share, subject to a total cap, through 2030. CNBC reported that the percentage remained 20%, citing a person familiar with the agreement. CNBC also reported that Microsoft would no longer pay a revenue share to OpenAI when customers bought access to OpenAI models through Azure. (finance.yahoo.com) October 28, 2025, brought a broader restructuring agreement. OpenAI and Microsoft said then that Microsoft held an investment in OpenAI Group PBC valued at about $135 billion, or roughly 27% on an as-converted diluted basis, and that Microsoft could independently pursue AGI alone or with third parties under the revised framework. ### What does Microsoft still keep from the partnership? (cnbc.com) Microsoft still keeps important commercial rights. OpenAI said Microsoft remains its frontier-model partner, retains Azure API exclusivity until AGI under the October 2025 agreement, and holds IP rights that extend through 2032. The April 27 update narrowed some of that exclusivity by allowing OpenAI to serve products on other clouds, but it did not end Microsoft’s central role. (openai.com) May 11 testimony in federal court in Oakland, California, showed Microsoft still framing the alliance as a commercial deal from the start. CNBC reported Nadella testified that Microsoft’s investments were not donations and said there had always been a clear business element to the partnership. ### What should readers watch next? Inception is the nearest concrete test. Reuters said the talks are active, that no agreement is assured, and that SpaceX is also competing for the startup. (openai.com) Next year is Microsoft’s own timetable. Reuters reported that Microsoft has told people it wants to build a cutting-edge in-house AI model by 2027, while the revised OpenAI agreement leaves Microsoft with model IP rights through 2032 and revenue-sharing terms that continue through 2030. (cnbc.com) (money.usnews.com)