Microsoft shops for OpenAI alternatives

Microsoft is approaching artificial-intelligence startups and weighing acquisitions as it plans for a future in which OpenAI is no longer its only critical source of frontier models, Reuters reported on May 13, citing five people familiar with the matter. The talks come weeks after Microsoft and OpenAI rewrote key terms of their alliance in an agreement both companies announced on April 27. (money.usnews.com) Under that amended deal, Microsoft kept access to OpenAI technology through 2032, but the license became non-exclusive and OpenAI gained broader flexibility to work across cloud providers. The timing matters because Microsoft has spent years tying flagship products such as Azure OpenAI Service, GitHub Copilot and Microsoft 365 Copilot to OpenAI models. (blogs.microsoft.com) Reuters said the company is now looking at startup deals that could add both research talent and alternative model supply. A separate Reuters report on May 11 said OpenAI had agreed to cap the total revenue it shares with Microsoft at $38 billion through 2030, citing The Information. ### Which part of the Microsoft-OpenAI deal changed in April? April 27 was the date Microsoft and OpenAI disclosed what they each called the next phase of their partnership. Microsoft said the amended agreement was meant to provide “flexibility” and “certainty,” while OpenAI said Microsoft’s license to its intellectual property would continue through 2032 on a non-exclusive basis. (money.usnews.com) OpenAI said Microsoft will no longer pay a revenue share to OpenAI, while OpenAI’s payments to Microsoft continue through 2030 at the same percentage but with a total cap. CNBC, citing the companies’ announcements, reported that the revised structure also removed the need for Microsoft to make decisions tied to any OpenAI declaration of artificial general intelligence. (money.usnews.com) ### What is Reuters saying Microsoft is doing now? Reuters reported on May 13 that Microsoft is shopping for AI startups and acquisition targets, citing five people familiar with the matter. Three of those people told Reuters the potential acquisitions could help Microsoft add AI talent and support its goal of building a cutting-edge AI model by next year. (blogs.microsoft.com) The report said the effort reflects planning for a future less dependent on OpenAI, which Reuters described as a once-vital partner. StreetInsider, republishing the Reuters report, said Microsoft had also weighed a deal for code-generation startup Cursor, though that detail was attributed to Reuters’ reporting rather than to a public Microsoft statement. (cnbc.com) ### Why does a $38 billion cap matter here? The $38 billion figure is the clearest new number attached to the relationship. Reuters reported on May 11 that OpenAI had agreed to cap total revenue-sharing payments to Microsoft at that amount, citing The Information and a person with knowledge of the arrangement. (money.usnews.com) Seeking Alpha, citing Wedbush, said the revised structure could save OpenAI as much as $97 billion in projected payments while allowing Microsoft to receive more cash earlier. That characterization came from Wedbush through Seeking Alpha, not from Microsoft or OpenAI directly. (streetinsider.com) ### Does this mean Microsoft is leaving OpenAI behind? Through 2032, Microsoft will still hold a license to OpenAI intellectual property, according to OpenAI’s April 27 post. Through 2030, OpenAI will still make revenue-share payments to Microsoft under the amended arrangement, and Microsoft remains a major shareholder, OpenAI said. At the same time, the exclusivity that once defined the partnership has been loosened. (money.usnews.com) Microsoft said the revised agreement gives both companies flexibility to pursue new opportunities, and OpenAI said it can now work with additional cloud providers even as Azure remains central to parts of the relationship. ### What should readers watch next? (seekingalpha.com) Next year is the first concrete milestone in the Reuters report. Three people familiar with Microsoft’s plans told Reuters the company wants to build a cutting-edge AI model by 2027, and the startup talks are meant in part to support that goal. Through 2030 and 2032, the revised contract will provide the next hard checkpoints. (openai.com) The revenue-share cap runs through 2030, while Microsoft’s non-exclusive license to OpenAI intellectual property runs through 2032, according to Reuters and OpenAI’s April 27 announcement. (money.usnews.com 1) (money.usnews.com 2) (blogs.microsoft.com)