New Delhi: Microsoft and OpenAI have revised a pact, ending Microsoft’s exclusive right to sell the ChatGPT creator’s artificial intelligence models. This change allows OpenAI to pursue new deals with other major players, including Amazon.
The shift marks a significant evolution in one of the most influential alliances in the AI industry and is seen as beneficial for both sides.
Following the news, Microsoft shares briefly fell 1.3 per cent before closing largely unchanged. Meanwhile, Alphabet rose 1.81 per cent, while Amazon slipped 1.1 per cent.
Microsoft’s early investment of about $13 billion since 2019 played a key role in OpenAI’s rise and supported growth in its Azure-computing cloud business. However, tensions had grown as OpenAI sought greater flexibility to partner with other cloud providers.
Under the new terms, OpenAI gains more freedom to secure computing resources and expand its enterprise offerings, strengthening its position against competitors like Anthropic ahead of potential IPOs. Microsoft, in turn, secures more predictable revenue streams from OpenAI, while OpenAI will gain newfound flexibility.
Microsoft will remain OpenAI’s primary cloud partner and retain licensing rights to its intellectual property through 2032. It will also receive a 20 per cent share of OpenAI’s revenue until 2030, though this will now be capped at an undisclosed level.
The revised agreement removes a clause that would have allowed OpenAI to stop payments if it achieved artificial general intelligence (AGI), the point where AI systems match or exceed human capabilities.
An internal memo reported by CNBC this month indicated that while the Microsoft partnership was foundational, it had limited OpenAI’s enterprise reach. Demand staggered after OpenAI began offering services through Amazon’s cloud platform.
“The new deal with Microsoft was essential for OpenAI to be successful in the enterprise market,” said Gil Luria, analyst at DA Davidson & Co. “AWS and Google Cloud enterprise customers have been limited in their ability to integrate OpenAI’s products because of the exclusive relationship and will now be more likely to consider OpenAI alongside Anthropic,” he added.
OpenAI has also reaffirmed its commitment to spend at least $250 billion on Azure services by 2032. Microsoft will continue to have priority access to OpenAI’s products on Azure, unless it chooses not to support them. Additionally, Microsoft will no longer share its Azure-related revenue with OpenAI for hosting its models.
Signing Deals With Microsoft Rivals
Under the original agreement, Microsoft had significant control over how OpenAI models were deployed in the cloud, allowing it to provide the widest access. Rival cloud providers like Amazon were limited to more restricted—and in some cases legally uncertain—methods of offering those models.
The Financial Times reported last month that Microsoft had even considered legal action against Amazon and OpenAI over a proposed $50 billion cloud deal that could have violated their exclusivity arrangement.
The revised agreement removes those restrictions.
In a LinkedIn post, Amazon CEO Andy Jassy said OpenAI’s models would soon be available directly to developers through Amazon Web Services “in the coming weeks”, with more details expected at an upcoming event in San Francisco on Tuesday.
“With this, builders will have even more choice to pick the right model for the right job,” Jassy wrote.
OpenAI has expanded its partnerships, including cloud and infrastructure deals with Oracle and Alphabet’s Google, a chip partnership with Nvidia, and a manufacturing tie-up with Luxshare as it moves further into consumer devices.
Microsoft Works To Reduce OpenAI Reliance
Microsoft appears to be allowing the new arrangement to move forward in exchange for greater certainty around a potential risk—if OpenAI were to claim it had achieved artificial general intelligence (AGI).
The two companies had already revised their partnership in October, easing key restrictions that previously limited OpenAI’s ability to raise capital and secure additional computing resources.
In recent months, Microsoft has also been working to reduce its dependence on OpenAI by developing its own AI models and integrating alternatives, including those from Anthropic, into its products such as 365 Copilot for enterprise users.
“From Microsoft’s perspective, it does not need to build out all the data center needs for OpenAI, freeing up capital for Copilot and other cloud capacity,” Barclays analysts said, calling the move a positive for both Microsoft and OpenAI.
Ending the exclusivity agreement could help Microsoft address antitrust concerns in regions including the US, the UK, and Europe, where regulators have been examining whether its close ties with OpenAI give it an unfair edge in cloud computing and enterprise AI markets.
(DD News)
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