Microsoft has reportedly reconsidered its approach to investing in OpenAI, following Sam Altman's brief ouster as CEO in November 2023. OpenAI has since sought other sources of funding and compute.
According to the New York Times, OpenAI CEO Sam Altman asked Microsoft CEO Satya Nadella for billions more in investment in the fall of 2023.
Nadella initially seemed open to the idea, but changed his mind after Altman's firing in November 2023, which reportedly left him "shocked and concerned," the New York Times reports, citing conversations with 19 people involved in the matter.
In recent months, Microsoft has stood firm despite OpenAI's ongoing requests for more funding and computing resources. OpenAI, which projects a multi-billion dollar loss in 2024, has managed to secure some reductions in computing costs from Microsoft, though the exact terms remain undisclosed.
OpenAI looks elsewhere
Microsoft's refusal led OpenAI to seek other funding and computing resources. In June 2024, Microsoft agreed to allow OpenAI to sign a $10 billion computing deal with Oracle. The AI company is in talks to lease an entire Oracle data center in Texas, which could house hundreds of thousands of Nvidia AI chips by mid-2026.
OpenAI recently secured $6.6 billion in funding from investors including Nvidia and MGX, a UAE-controlled technology investment firm. The company also secured a $4 billion loan.
Dealing with the past
Both companies face the challenge of converting Microsoft's previous $13.75 billion investment into equity as OpenAI transitions from non-profit to for-profit status. This conversion is necessary for OpenAI to retain its current investor funding.
Microsoft has enlisted Morgan Stanley to assist, while OpenAI is working with Goldman Sachs on the sensitive process, the Wall Street Journal reports.
Despite the tensions, both companies are trying to maintain a united public front. Sam Altman tells the NYT that Microsoft's "early big bet" and the "vast compute resources" Microsoft provided were essential to OpenAI's research breakthroughs and that both companies are "committed to pursuing our shared vision and achieving even greater things together far into the future."
