The honeymoon phase of Microsoft and OpenAI's relationship appears to be at an end, with Redmond naming the recipient of billions of its dollars a competitor in its latest annual report.
The Windows maker's annual filing for its recently concluded fiscal 2024 showed up on the SEC's website in the wake of Q4 earnings numbers released yesterday. Buried in the recesses of all the financial details and promises of a brighter AI-powered future were a few critical lines that hint at a changing relationship between Satya and Sam.
"Our AI offerings compete with AI products from hyperscalers such as Amazon and Google, as well as products from other emerging competitors, including Anthropic, OpenAI, Meta, and other open source offerings, many of which are also current or potential partners," Microsoft said in the report. "Our Search and news advertising business competes with Google, OpenAI, and a wide array of websites, social platforms like Meta, and portals that provide content and online offerings to end users."
Microsoft has invested an estimated $13 billion in OpenAI since the pair began collaborating in 2019.
"We have a long-term partnership with OpenAI," Microsoft said, adding that OpenAI models are deployed across its consumer and enterprise products, and reminding everyone that "Azure powers all of OpenAI's workloads."
"We have also increased our investments in the development and deployment of specialized supercomputing systems to accelerate OpenAI's research," Microsoft mentioned in its report.
A rift, or regulatory maneuvering?
Microsoft's strategy since buying into OpenAI has been one of aggressive addition of artificial intelligence to its products, leading to regulatory scrutiny of the pair in the US and abroad.
That scrutiny may have been behind Microsoft giving up its non-voting observer seat on OpenAI's board last month as the UK's Competition and Markets Authority and US Federal Trade Commission continue to review the matter over antitrust concerns.
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Microsoft took a seat on the OpenAI board following CEO Sam Altman's ouster and reinstatement late last year. Microsoft hasn't acknowledged that regulatory scrutiny was behind it dropping the seat, instead saying that it departed because it had become "confident in the company's direction" after eight months of "significant progress."
Given Microsoft's OpenAI board departure may have been more about appeasing regulators, it's possible OpenAI's recently announced SearchGPT AI search engine may be less about actual competition and more about pleasing governments too.
What could be seen as a direct response to Bing's new generative search features, SearchGPT could simply be another way for Sam and company to share how it's not just another vestigial growth on Microsoft's side.
The same goes for departing the board and declaring OpenAI a competitor in its annual report – they may be competing in a few areas, but mutually sunk costs are likely keeping the pair together too. OpenAI has wormed its way deep into the heart of Microsoft's operations, while Microsoft has a simultaneous stranglehold on OpenAI's compute resources.
Microsoft and OpenAI have been asked to comment. ®