Will Microsoft Come Out Ahead as Its OpenAI Deal Ends
358Microsoft and OpenAI have been close partners for years, but now their relationship is coming to an end. They’ve agreed on a loose plan to part ways, and it’s clear who might come out on top in the long run. Let’s look back at how this partnership started and what the future might hold for both companies.
The Rise and Tension of the Microsoft-OpenAI Partnership
The story begins in 2019 when Microsoft invested around $13 billion into OpenAI. This wasn’t just a cash gift. Microsoft got a stake in OpenAI, although the exact size wasn’t made public. Most importantly, Microsoft gained the right to use OpenAI’s technology, including ChatGPT, in any way it wanted. This gave Microsoft a huge advantage in building its own AI tools, like the Copilot feature in its Office apps.
Over time, the two companies started to clash over what Microsoft should get from its investment. Key issues included how much of OpenAI Microsoft owned, whether it would keep exclusive rights to OpenAI’s tech, and if OpenAI would be free to partner with competitors. The disagreements grew, and tensions escalated.
The Growing Rift and Signs of a Breakup
Things got more heated as OpenAI considered launching a new productivity suite to compete directly with Microsoft 365. There were even hints that OpenAI might accuse Microsoft of anti-competitive practices and ask regulators to investigate. Meanwhile, Microsoft thought about pulling out of negotiations altogether, which could have prevented OpenAI from going public.
Despite these tensions, both sides stepped back from the brink—for now. Recently, OpenAI announced a significant new investment from SoftBank worth $40 billion. It also signed a five-year, $300 billion deal to buy cloud services from Oracle instead of Microsoft. Nvidia then revealed it would invest up to $100 billion in OpenAI. On the other side, Microsoft has been developing its own large language models (LLMs) to replace or supplement ChatGPT and has partnered with competitors like Anthropic to improve its AI tools.
The Vague Deal and What It Could Mean
In September, Microsoft and OpenAI announced they had reached a general understanding about what Microsoft might get when OpenAI’s for-profit arm goes public. The details are sparse, but it could involve Microsoft approving OpenAI’s restructuring, with the nonprofit holding control of the new company. The deal may also impact how much revenue Microsoft continues to earn from its past investments—currently at 20%, though that might be negotiated down.
It’s likely that Microsoft wants to keep broad rights to use ChatGPT and its technology freely, and there’s speculation that Microsoft might get exclusive access to OpenAI’s APIs on Azure. But the specifics—such as ownership stakes or exact revenue shares—are still up in the air.
Who Benefits Most from the Investment?
Looking at the bigger picture, it’s clear Microsoft has gained more from its investment than OpenAI. Most of Microsoft’s initial $13 billion wasn’t cash but free cloud computing resources. Before the investment, Microsoft was valued at about $1.2 trillion; now, it’s worth over $3.8 trillion. That’s a huge return in just six years, especially considering Microsoft’s role in leading the AI market without having to develop all the tech itself.
OpenAI also benefited. Thanks to Microsoft’s funding, it gained financial stability and the resources needed to accelerate its research, attracting over $100 billion from other investors. Still, Microsoft’s broader business—Windows, Office, cloud services—positions it to thrive even if AI hype cools off. The market bubble around generative AI is likely to burst eventually, and when that happens, OpenAI might struggle more because it relies heavily on its AI tech alone.
Even if the AI industry shrinks, Microsoft’s diverse portfolio will help it stay afloat. OpenAI’s future, however, looks more uncertain. It’s a one-trick pony with no other major revenue streams. So, no matter the final terms, Microsoft’s early bet seems to have paid off far more than OpenAI’s.
In the end, Microsoft’s strategic investments and broad business reach give it a significant advantage. As the AI landscape continues to evolve, it’s likely that Microsoft will come out ahead, even as OpenAI navigates the challenges of a rapidly changing industry.
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