Microsoft, in a report submitted to the SEC in July, wants the federal government to see its relationship with OpenAI more as a friend and foe situation than a real partnership. In its periodic financial performance and conditions report on Form 10-K, Microsoft declared OpenAI as a competitor in several passages, while also mentioning OpenAI as a strategic partner multiple times throughout the document.
Notable Detail in the Report
Interestingly, Microsoft talks about dozens of competitors and intense competition in all markets in its statements about competition. These include companies ranging from Apple to Nintendo, as well as various software and coding organizations. However, Redmond only mentions the strategic partner OpenAI throughout the document.
A superficial review revealed that the word partner, including its plural versions, appears 72 times. Among these, it seems that Microsoft does not name any partner other than OpenAI. Although this is unlikely to have legal significance, it is noteworthy that OpenAI and Microsoft’s strategic partnership faces antitrust investigations in the UK, US, and EU.
The Relationship Between Microsoft and OpenAI
The relationship between Microsoft and OpenAI had all the characteristics of a major tech acquisition without an actual purchase. In July 2019, Microsoft invested one billion dollars in OpenAI and became its sole cloud provider; essentially buying the rights to host ChatGPT years before its launch.
When ChatGPT was released, Microsoft invested another 10 billion dollars. Later, Microsoft gained early and semi-exclusive access to apply GPT-4 to its own Copilot and Bing services, as well as to make upgrades to OpenAI’s own services.
In 2023, OpenAI experienced a turbulent leadership coup with the brief ousting of CEO and co-founder Sam Altman and changes to the company’s board of directors. While Altman was out, Microsoft promised to hire him and other OpenAI employees who were fired or willing to leave and give them their own divisions within the company.
Altman eventually returned to his position at the head of OpenAI, and the board was restructured to include an observer seat reserved for Microsoft. Eight months later, in July 2024, Microsoft relinquished this board seat, claiming it believed the observer seat was no longer necessary.
