Microsoft’s multi-billion-dollar alliance with OpenAI has long been touted as the software giant’s golden ticket to dominate generative AI. This week, however, multiple outlets reported that the partnership is fraying, and that OpenAI’s leadership is actively weighing an antitrust complaint against its largest backer. As reported by Reuters, Microsoft is even prepared to walk away from negotiations over a new ownership structure if the two sides cannot agree on control and profit-sharing terms. According to the Wall Street Journal:
OpenAI wants to loosen Microsoft’s grip on its AI products and computing resources, and secure the tech giant’s blessing for its conversion into a for-profit company. Microsoft’s approval of the conversion is key to OpenAI’s ability to raise more money and go public.
But the negotiations have been so difficult that in recent weeks, OpenAI’s executives have discussed what they view as a nuclear option: accusing Microsoft of anticompetitive behavior during their partnership, people familiar with the matter said. That effort could involve seeking federal regulatory review of the terms of the contract for potential violations of antitrust law, as well as a public campaign, the people said.
These revelations land less than seven months after 37 percent of Microsoft’s shareholders backed NLPC’s proposal demanding a board-level review of the legal and financial risks created by the company’s aggressive artificial-intelligence push, including “unethical or improper usage of external data” and other behavior that could draw lawsuits or regulatory scrutiny. Proxy adviser Glass Lewis endorsed our resolution precisely because Microsoft has not adequately demonstrated that it is managing these growing risks.
NLPC’s proposal focused on data privacy and ethical data usage. However, antitrust heat should equally concern investors. A formal complaint would trigger months—if not years—of investigations by the Department of Justice or Federal Trade Commission. That cloud could delay product rollouts that Microsoft has already baked into revenue projections for Copilot, Azure and GitHub. OpenAI also supplies Microsoft with its most valuable intellectual property. If the startup wins concessions or takes its models elsewhere, Microsoft would face a scramble to replicate comparable capabilities in-house. Lastly, even if regulators dismiss OpenAI’s allegations, shareholders will foot the bill for defense costs, potential settlements, and management distraction.
The latest headlines regarding Microsoft’s relationship with OpenAI underscore that the company’s artificial intelligence bet is the engine driving its historic valuation, and bad news regarding its AI offerings could be devastating for shareholders. Accordingly, Microsoft should give shareholders more insight into its AI risk oversight efforts.
