THE GIST
Sam Altman made it official bright and early Monday morning: OpenAI is seeing other people.
Microsoft will stay the ChatGPT-maker’s “primary” cloud partner, but OpenAI can now serve products across any cloud.
Microsoft’s stock promptly dumped on the announcement, recovered, and is now trading red 0.37% at the time of writing.
WHAT HAPPENED
The official reason for OpenAI’s and Microsoft’s seemingly amiable shift from monogamy to polyamory is the same justification AI companies have been screaming at the rest of the world: Get on board or get left behind.
In a joint statement from both companies, OpenAI and Microsoft explained that because of this unavoidable, inescapable “rapid pace of innovation,” they are now seeing it as necessary to “evolve” their partnership to selflessly “benefit our customers and both companies.” This “amended agreement” is meant to “simplify” their partnership while remaining focused on the broader end goal of “delivering the benefits of AI broadly.” Both companies’ main prerogatives here are to “build and operate AI platforms at scale” while looking ahead to “new opportunities.”
Favorable preambles aside, this announcement feels like OpenAI and Microsoft are telling the kids they’re getting divorced.
Microsoft will remain OpenAI’s “primary” cloud partner, and any updated model and product will ship to Azure first. If Microsoft doesn’t want them for any reason, they can choose “not to support the necessary capabilities.” Probably the biggest line in this section is that OpenAI can now serve its products to customers “across any cloud provider.” Before, they were tied to Microsoft as an exclusive host and IP licensee. Those days are over, which means they will start splitting capacity across Azure, AWS, Oracle, CoreWeave, and more. If you thought OpenAI’s inference costs were high now… just wait.
Microsoft will no longer have to pay a revenue share to OpenAI. Based on numbers from TechCrunch, this is around 20% of Bing and Azure OpenAI revenue, which could be a likely high-hundreds-of-millions-per-year revenue stream from Microsoft just for OpenAI to buy their freedom. The real kicker is Microsoft is still getting paid by OpenAI “through 2030,” but is now “subject to a total cap,” which remains confidential, though rumors suggest 20%.
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The biggest red flags in this announcement were, as we’ve grown accustomed to, the things not said: where does this leave Microsoft, where is OpenAI getting the money to do this, and what happened to AGI?
