Microsoft ready to walk away from OpenAI deal amid stalled talks
Microsoft is considering ending its complex negotiations with OpenAI over the future of their multibillion-dollar partnership, as the AI company pushes to become a for-profit business; Financial Times has reported. According to sources familiar with the talks, disagreements remain unresolved—particularly over the size of Microsoft’s future stake in OpenAI.
If no agreement is reached, Microsoft plans to rely on its existing contract, which guarantees access to OpenAI’s technology through 2030 unless a better offer emerges. However, insiders say the discussions are still active and constructive, with both sides meeting daily in hopes of finding a resolution. In a joint statement, the companies said they remain optimistic about continuing their collaboration.
OpenAI’s transition from a nonprofit to a conventional corporate structure is essential to unlock new funding and pursue an IPO. Microsoft’s approval is required for this conversion, which must be finalized by year-end or OpenAI risks losing significant investment commitments, including up to $10 billion from SoftBank.
Negotiations over Microsoft’s stake have ranged from 20% to 49%, in return for its $13 billion investment to date. The companies are also renegotiating the original 2019 contract, which gave Microsoft exclusive rights to sell OpenAI’s models and a 20% share of revenues up to $92 billion.
Microsoft is unwilling to compromise on its rights to OpenAI’s technology or revenue share. Meanwhile, tensions have risen, with reports suggesting OpenAI considered accusing Microsoft of anti-competitive behavior. A person familiar with Microsoft’s thinking said the company is content with the current arrangement and prepared to maintain it through 2030.
Some Microsoft insiders argue the company gains more by maintaining revenue flow than by securing a bigger equity stake. Microsoft has also begun expanding beyond OpenAI, recently offering Elon Musk’s xAI model “Grok” to its cloud customers—part of CEO Satya Nadella’s strategy to focus on AI-powered applications rather than just foundational models.
Key contract terms under discussion include Microsoft’s exclusive Azure cloud rights, its right of first refusal to supply computing resources to OpenAI, and its early access to OpenAI’s IP before it reaches artificial general intelligence. The latter clause is expected to be dropped.
OpenAI is also grappling with limited access to computing power as ChatGPT usage has soared to 500 million weekly users. The strain on infrastructure has reportedly strained relations, with OpenAI CEO Sam Altman pushing Microsoft for faster access to resources.
Even if an agreement is reached, regulatory approvals in Delaware and California are required. The conversion is also being legally challenged by Elon Musk and supported by former OpenAI staff.
A deal is crucial for OpenAI, as investors in recent funding rounds have made their commitments conditional on the nonprofit-to-profit transition. If that fails, they could seek partial repayment. While delays could reduce SoftBank’s $30 billion commitment by $10 billion, OpenAI sources remain confident investors will stay on board.
As reported by FT, according to one Silicon Valley figure, Microsoft sees the burden of resolving these issues as OpenAI’s responsibility—not its own.
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