Microsoft shares slip after OpenAI breaks off exclusivity deal

Shares of Microsoft fell on Monday after OpenAI and the software giant unveiled a revised partnership that ends Microsoft’s exclusive hold over the startup’s technology.

Shares of Microsoft tumbled nearly 3% after the ⁠announcement on ‌Monday, while Alphabet and Amazon gained slightly. The company said it will remain OpenAI’s primary cloud partner and retain rights to use the startup’s intellectual property through 2032.

New deal


Under the reworked partnership, Microsoft will remain OpenAI's primary cloud partner and will hold a license ⁠to ChatGPT creator's intellectual property through 2032. Microsoft will also not pay a revenue share to OpenAI.

OpenAI products would also first ship on Microsoft's Azure cloud-computing platform unless the software giant cannot or chooses not to roll out the capabilities.

However, the changes give OpenAI greater freedom to sell and deploy its technology across cloud platforms, including those operated by Microsoft rivals Amazon ‌and Alphabet's Google. Investors view this as a dilution of Microsoft’s competitive edge in AI. Under the new terms, the financial arrangement between the two companies are also changed, with revenue-sharing provisions continuing in a capped form through 2030.

Frayed ties

Microsoft was an early backer of the Sam Altman-led company, benefitting from early access to ChatGPT models in the AI race. But tensions have been rising ⁠between the companies as OpenAI strikes cloud deals with rival companies and investors scrutinise Microsoft's reliance on OpenAI.

The Financial Times reported in March that Microsoft was weighing legal action against Amazon and OpenAI over a $50 billion cloud deal that could breach its exclusive ‌cloud partnership.