Microsoft unlocks OpenAI’s cloud doors to rivals after ending exclusivity deal

The news: Microsoft and OpenAI revised their partnership agreement.

• The Big Tech giant is no longer the exclusive infrastructure and cloud provider for OpenAI, but the ChatGPT maker can now build its products and workloads on other cloud partners’ infrastructure.
• Microsoft retains the right of first refusal as well as the rights to use OpenAI’s IP within its own products and exclusivity on OpenAI’s APIs through 2030.

The fine print: The Microsoft-OpenAI partnership has a caveat—the deal will be nullified if OpenAI achieves artificial general intelligence (AGI).

• The companies agreed to define AGI as an AI system capable of generating at least $100 billion in profits.
• Earlier this month, OpenAI CEO Sam Altman said that his company was confident in building AGI as it “traditionally understood it” and that AI agents may join the workforce this year.

A win for Google: The end of Microsoft and OpenAI’s exclusive computing deal will be welcome news for Google.

• In December, Google asked the Federal Trade Commission (FTC) to break up the partnership, citing concerns that the deal locks out competitors and reduces Microsoft’s incentive to compete with OpenAI.
• Google added that the partnership pushes companies using OpenAI models to rely on Microsoft infrastructure.

The FTC has not opened an official investigation, and a probe from the UK’s Competition and Markets Authority (CMA) didn’t gain momentum.

Stargate push: This partnership change could be attributed to the massive, $500 billion data center project that OpenAI is working on, with Microsoft serving as a key partner.

• Project Stargate will build 20 data centers over the next four years and will require considerable energy resources—estimated at 50 megawatts of electricity—which is enough to power thousands of homes.
• Stargate’s infrastructure will also require overcoming limitations on AI chip production and supply chain concerns.

OpenAI, which will be Stargate’s primary operator, could benefit from using multiple cloud providers to build next-gen models.

Our take: Microsoft may not be willing to keep financing OpenAI’s sky-high computing costs, especially when ChatGPT’s subscriptions are losing money. Opening up the walled garden for computing power could help Microsoft benefit from OpenAI’s models in its own products while offloading some of the costs of AI improvement to other cloud providers.

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