Trouble between AI’s power couple: What’s brewing between Microsoft and OpenAI?

The biggest partnership in the artificial intelligence (AI) world, between Microsoft and OpenAI, is showing signs of cracks.

Microsoft invested $1 billion in the ChatGPT maker in 2019, ahead of the generative AI boom. The companies then rode the wave to the top, with the software maker injecting billions more in the company in the following years.

But then disagreements arose over controlling AI technology and computing resources, intellectual property rights, as well as OpenAI's organisational transition plans and competitive tensions.


These issues have made the once-close partnership shaky, and may fundamentally change it.

What's happened?

OpenAI needs Microsoft's approval to complete its transition into a public-benefit corporation. But sources told Reuters the companies have not been able to agree on details even after months of negotiations.

Tensions have risen between the two sides after reports emerged that OpenAI is considering a "nuclear option", accusing Microsoft of anticompetitive behaviour.

The companies are discussing revising the terms of Microsoft's investment, including the future equity stake it will hold in OpenAI, the report said, adding that the ChatGPT owner wants to modify existing clauses that give Microsoft exclusive rights to host OpenAI models in its cloud.

Reuters reported that Microsoft was even ready to walk away from its high-stakes negotiations with OpenAI over the future of its alliance.

Windsurf issue

The key issue in the dispute is now Microsoft's access to OpenAI's intellectual property. OpenAI even wanted to exclude Microsoft’s access to AI coding startup Windsurf, which it had acquired, due to competing products.

OpenAI acquired Windsurf, an AI-assisted coding tool formerly known as Codeium, for about $3 billion, marking the company's largest acquisition to date.

Microsoft-owned Github offers a competing AI tool for programmers. Investors have also poured money into a new crop of startups offering similar tools, including Anysphere, the startup behind Cursor.

Analysts have said that the partnership between the legacy giant and the AI startup was always unstable, with Microsoft testing alternatives and preparing for a way forward without OpenAI.