Microsoft Loses Exclusive Cloud Deal with OpenAI

Microsoft's exclusive grip on OpenAI's cloud computing needs is loosening, CNBC reports. While Microsoft remains OpenAI's largest investor and a key cloud provider, the AI startup will now be able to utilize other cloud providers as its computational demands grow.

This shift was announced as part of President Biden's unveiling of the "Stargate Project," a multi-billion dollar initiative involving OpenAI, Oracle, Softbank, and Microsoft to boost AI infrastructure in the U.S. The project will be structured as a separate company with initial investments totaling $100 billion, potentially reaching $500 billion over the next four years.

Under this new arrangement, Microsoft retains "right of first refusal" when OpenAI requires additional cloud capacity. However, OpenAI now has the flexibility to engage with alternative cloud providers if Microsoft is unable to fulfill its needs. This change in their relationship marks a departure from their previous exclusive agreement.

Oracle's increased involvement is significant. The database software maker, which has been expanding its cloud offerings, is now a "key initial technology partner" alongside Arm, Microsoft, and Nvidia in the Stargate Project's data center infrastructure development. Oracle's involvement was further solidified last June when Microsoft announced the expansion of its Azure AI platform to Oracle's cloud.

Despite the evolving partnership, OpenAI has committed to continued growth on Microsoft's Azure platform. OpenAI recently made a "new, large Azure commitment" for product development and model training, Microsoft confirmed. Additionally, Microsoft retains rights to OpenAI's intellectual property, which is utilized in products like Copilot, and maintains exclusive rights to fulfill OpenAI's application programming interface (API) computing requests.

However, the evolving relationship signals a potential shift in the dynamics between the two companies. Microsoft categorized OpenAI as a competitor in July, and Microsoft CEO Satya Nadella has acknowledged the challenges of balancing OpenAI's ambitious goals with Microsoft's own strategic considerations.