Microsoft and OpenAI have agreed to end the software giant’s exclusive right to sell the startup’s AI models, paving the way for the ChatGPT creator to strike deals with cloud computing rivals like Amazon.
In exchange for ending this exclusivity — which helped boost Microsoft’s cloud sales in the early years of the AI boom — the world’s largest software maker will stop paying revenue share for the OpenAI products it resells in its cloud. The two companies announced the new agreement in a joint statement on Monday.
The new pact seeks to simplify a complex relationship that has been fundamental to the rise of OpenAI and the broader boom in artificial intelligence. Since then, OpenAI has been pursuing agreements with multiple cloud providers, including Amazon, to meet its growing computing needs and deliver AI software to a broader audience.
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“The increased predictability in the amended agreement strengthens our joint ability to build and operate AI platforms at scale, while giving both companies the flexibility to seize new opportunities,” OpenAI and Microsoft said in the statement.
Monday’s agreement paves the way for OpenAI models to appear on Amazon Web Services and other cloud computing providers.
As part of an investment announced earlier this year, the Amazon unit said it was co-developing products with OpenAI that would be hosted on AWS. Microsoft has even considered legal action, arguing that such an effort would almost certainly violate its exclusive rights to OpenAI’s intellectual property, the report said. Financial Times last month.
Microsoft remains OpenAI’s “lead cloud provider,” and the startup’s new products will first be made available on Azure, Microsoft’s cloud unit.
The revenue share paid by OpenAI on sales of products it sells directly will be capped, according to the companies. But, until this limit is reached — which was not disclosed — the new agreement brings more predictability that OpenAI will continue making these payments.
Microsoft will receive a share of OpenAI’s revenue until 2030, regardless of the startup’s progress toward its goal of building artificial general intelligence — a system capable of matching human capabilities in a variety of tasks. Under the previous agreement, revenue share payments would no longer be due if OpenAI reached this milestone.
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As part of OpenAI’s restructuring last year, when it began operating as a for-profit company, Microsoft received a 27% stake in the AI startup. The software giant was one of the main obstacles in OpenAI’s corporate reconfiguration, while the two negotiated the complex terms of the partnership.
Microsoft’s relationship with OpenAI should be highlighted this week, when the companies will face Elon Musk in court. The billionaire accuses OpenAI of abandoning its founding principles by transforming itself into a for-profit company backed by billions of dollars from Microsoft. He seeks up to $134 billion in damages from OpenAI and Microsoft.
Microsoft shares fell about 1% at the opening of markets in New York on Monday. Amazon’s dropped less than 1%.
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“We do not believe this revised agreement should come as a major surprise to investors at this time,” Evercore ISI analysts wrote in a report to clients on Monday. “Microsoft has increasingly signaled interest in a broader multi-model strategy, while OpenAI has clear incentives to expand its market distribution.”
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