Microsoft labels longtime partner OpenAI as competitor in annual report

Microsoft’s latest annual report has stirred interest by listing OpenAI as a competitor. This small inclusion could hint at a notable shift in their relationship. The announcement is surprising, given Microsoft’s significant investment in OpenAI and its collaborative history with the AI company. 

Microsoft and OpenAI have shared a unique bond. As OpenAI’s exclusive cloud provider, Microsoft integrated OpenAI’s AI models into its products for both commercial clients and consumers. Notably, Microsoft has invested around $13 billion in OpenAI.

However, Microsoft’s latest annual report highlights a competitive edge, listing OpenAI alongside tech giants like Amazon, Google, and Meta. This change signals a potential shift as both companies explore overlapping territories.

In its annual report, Microsoft detailed its AI competition, naming OpenAI among others like Anthropic and Meta. This move is particularly intriguing as OpenAI has been a critical partner, especially with the development and deployment of ChatGPT. Recently, OpenAI announced a prototype search engine called SearchGPT, which directly challenges Microsoft’s own AI initiatives.

The company stated, "Our AI offerings compete with AI products from hyperscalers such as Amazon and Google, as well as products from other emerging competitors, including Anthropic, OpenAI, Meta, and other open source offerings, many of which are also current or potential partners."

Microsoft’s Azure platform offers access to OpenAI’s models, while alternatives like Microsoft’s Copilot chatbot are available through Bing and Windows. Despite the new competitive stance, an OpenAI spokesperson told CNBC that the partnership’s competitive nature was always understood and that their collaborative relationship remains unchanged.

The past year has been eventful for both companies. Tensions were highlighted when Microsoft CEO Satya Nadella was reportedly not informed before OpenAI’s board temporarily ousted CEO Sam Altman in November. Following Altman’s quick reinstatement, Microsoft was given a non-voting board seat at OpenAI, a position it relinquished earlier this month.

Further complicating the dynamic, Nadella hired Mustafa Suleyman, co-founder of DeepMind, to lead a new unit called Microsoft AI. This strategic move included several employees from Inflection AI, Suleyman’s previous startup.

Despite the competitive acknowledgment, Nadella and Altman maintain a close professional relationship. Nadella’s comments in a recent New York Times interview highlight a dynamic of mutual ambition and ongoing collaboration.