In this eventuality,\u00a0Microsoft would\u00a0rely on its existing commercial contract to retain access to OpenAI\u2019s technology until 2030, unless there was an offer that was equal to or better than its current arrangements,\u00a0according to\u00a0these people.<\/p>\n
These people stressed, however, that Microsoft was operating in \u201cgood faith\u201d and both parties were meeting daily to try to put a plan on the table and were hopeful a deal could be reached.<\/p>\n
\u201cWe have a long-term, productive partnership that has delivered amazing AI tools for everyone,\u201d Microsoft and OpenAI<\/a> said in a joint statement. \u201cTalks are ongoing and we are optimistic we will continue to build together for years to come.\u201d<\/p>\n OpenAI needs a deal with Microsoft<\/a> to complete a move away from its non-profit origins into a more conventional corporate structure, which it believes will unlock funding and launch an initial public offering.<\/p>\n Microsoft must approve the switch by the end of the year or OpenAI risks losing billions of funding from other investors, including SoftBank. <\/p>\n In discussions over the past year, the two sides have battled over how much equity in the restructured group Microsoft should receive in exchange for the more than $13bn it has invested in OpenAI to date. Discussions over the stake have ranged from 20 per cent to 49 per cent. <\/p>\n The pair are also revising the terms of its wider contract, first drafted when Microsoft invested $1bn into OpenAI in 2019.\u00a0<\/p>\n Under its current arrangement, Microsoft has exclusive rights to sell access to OpenAI\u2019s models and receives a 20 per cent share of revenues up to $92bn. <\/p>\n Microsoft is reluctant to give ground on its continued access to OpenAI\u2019s technology or its share of the group\u2019s revenues, according to multiple people close to the discussions.<\/p>\n The Wall Street Journal reported this week that OpenAI had considered a \u201cnuclear option\u201d of accusing Microsoft of anti-competitive behaviour over its partnership.<\/p>\n \u201cHolding out is Microsoft\u2019s nuclear option\u2009.\u2009.\u2009.\u2009and they are just making OpenAI sweat,\u201d said one person close to OpenAI, who also argued access to the ChatGPT maker\u2019s IP was necessary for Microsoft to maintain its position in the race to commercialise AI against rivals such as Google and Meta.<\/p>\n One person close to Microsoft said the \u201cstatus quo\u201d was acceptable for the Big Tech company and that it was \u201chappy with the current contract\u201d and prepared to \u201crun it through\u201d until 2030.\u00a0<\/p>\n \u201cThe market cares about how much revenue Microsoft is making\u2009.\u2009.\u2009. not about how much equity it owns in OpenAI, [and] this deal moves revenue away from Microsoft,\u201d said another person who has discussed the negotiations with Microsoft executives. <\/p>\n \u201cThe question is, what does Microsoft get in return for giving up the right to that revenue?\u201d<\/p>\n Microsoft has already begun diversifying away<\/a> from OpenAI models in recent months, as part of chief executive Satya Nadella\u2019s belief that leading models will become \u201ccommoditised\u201d \u2014 or have less value than being able to sell AI-enabled applications and digital assistants built on top of them.<\/p>\n In May, the software giant made Elon Musk\u2019s xAI model Grok available to its cloud computing customers. <\/p>\n \u201cOpenAI is not necessarily the frontrunner anymore,\u201d said one person close to Microsoft, remarking on the competition between rival AI model makers.<\/p>\n Several other elements of the current contract are also up for negotiation, including Microsoft\u2019s exclusive rights to sell OpenAI\u2019s software through its Azure cloud computing service; its right of first refusal to provide computing infrastructure to OpenAI; and the software giant\u2019s access to the AI group\u2019s intellectual property before it reaches \u201cartificial general intelligence\u201d.<\/p>\n The latter clause refers to a point where OpenAI creates a \u201chighly autonomous system that outperforms humans at most economically valuable work\u201d and is likely to be dropped<\/a>, as the Financial Times previously reported.<\/p>\n OpenAI\u2019s chief executive Sam Altman and its chief financial officer Sarah Friar have also said the company is struggling to access the computing power needed to run ChatGPT, which has raced to 500mn weekly active users worldwide, while also training new models and launching products.\u00a0<\/p>\n Two former Microsoft executives involved in managing OpenAI\u2019s compute requirements said the relationship between the groups had frayed significantly over the issue, particularly around Altman\u2019s demands for faster access to even more infrastructure. <\/p>\n Even if the issues are resolved, the transaction will have to be approved by attorneys-general in Delaware and California. The conversion is also subject to a legal challenge from xAI chief Musk, which has been supported by former OpenAI employees.<\/p>\n Recommended<\/p>\n
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