What if Microsoft let OpenAI go free?

Call it a spectacular modern-day version of Renaissance patronage. Since 2019 Microsoft has provided more than $13bn in cash and computing capacity to OpenAI, a once-penniless startup that is now at the forefront of generative artificial intelligence (AI) and, as of its most recent fundraising round, worth $157bn. In exchange, Microsoft has gained the exclusive right to run OpenAI’s models on Azure, its cloud-computing business.

So far it has been a wildly successful partnership. Funding from Microsoft has helped OpenAI build bigger and better large language models (LLMs). That technology, in turn, has been incorporated into Microsoft’s various software products. The ties between the two have allowed Azure to chip away at the lead of AWS, Amazon’s cloud-computing division.  

Yet like Michelangelo with the Medicis, OpenAI sometimes chafes at the ties to its wealthy benefactor. Some of its board members and other investors have told The Economist they believe that Microsoft should loosen its grip. They have their eyes on the half of the cloud-computing market still controlled by AWS. Gaining access to that would increase OpenAI’s already dominant position in the provision of LLms, lifting revenues that are expected to be upwards of $3.5bn this year.

Those championing more commercial freedom for OpenAI argue that although Microsoft might resent sharing models with AWS, in the long run its equity stake in OpenAI would mean it would benefit from the model-maker gaining broader market access. Antitrust concerns also bolster the case for giving OpenAI greater independence.

Microsoft has already begun reducing its dependence on OpenAI. Satya Nadella, the tech giant’s boss, was reportedly shocked when Sam Altman, his counterpart at OpenAI, was briefly ousted last November, before being quickly reinstated. Since then Microsoft has been hedging its bets, including by adding LLMs from Mistral, a French AI firm, and others to its line-up and hiring nearly all the staff of Inflection, an OpenAI rival, including its boss, Mustafa Suleyman.

Microsoft and OpenAI are in the process of renegotiating the terms of their relationship as the model-maker changes its corporate structure from a non-profit to a profit-making entity. There may also be a looming sunset clause. OpenAI is believed to have the right to dissolve its commercial ties with Microsoft if its models reach a level of superhuman capability called artificial general intelligence. What that means in practice is subjective, but some AI enthusiasts argue it could be only a few years away.

Amazon, for its part, would be delighted to gain access to OpenAI’s models.  But Amazon has neither a big software business where it can demonstrate its AI capabilities nor an LLM whizzy enough to compete with those of OpenAI or Google.

The long-running trend in cloud computing is away from exclusivity towards more open relationships. Like the Medicis, Microsoft may well go down in history for having spotted creative genius early on. But its hold over OpenAI may not last forever.

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