Microsoft prepared to abandon high-stakes OpenAI talks: Report

Microsoft is prepared to walk away from complex negotiations with OpenAI over the future of their multibillion-dollar partnership if the two companies fail to agree on key terms, the Financial Times reported on Thursday, citing people familiar with the matter.

Microsoft, which has invested more than $13 billion in the ChatGPT maker, is negotiating the size of its stake in the restructured entity, with discussions ranging from 20% to 49%, the FT said.

However, if the parties cannot reach a deal, Microsoft is prepared to rely on its existing contract, which grants access to OpenAI’s technology until 2030.

The companies are said to be negotiating “in good faith”, and daily meetings are going on.

“We have a long-term, productive partnership that has delivered amazing AI tools for everyone,” Microsoft and OpenAI said in a joint statement. “Talks are ongoing and we are optimistic we will continue to build together for years to come.”

OpenAI, meanwhile, faces pressure to finalise the transition by year-end or risk losing billions in funding from investors, including SoftBank, the FT reported.

Negotiations have also focused on revising Microsoft’s commercial agreement with OpenAI, which dates back to 2019 and gives the software giant exclusive rights to sell OpenAI’s models and a 20% share of revenues up to $92 billion.

Microsoft is reportedly reluctant to alter those terms, especially if it reduces its share of revenues or long-term access to OpenAI’s intellectual property.

The partnership has become increasingly strained amid disagreements over computing resources and control of future AI infrastructure, the report said.

Microsoft has also begun to diversify its AI offerings, recently adding Elon Musk’s xAI model Grok to its Azure platform.

Several other elements of the contract are under review, including Microsoft’s exclusive rights to sell OpenAI software via Azure and its right of first refusal for infrastructure provision.

A clause granting Microsoft early access to OpenAI’s technology before achieving “artificial general intelligence” may also be dropped, according to the FT.

The restructuring will require regulatory approvals and faces a legal challenge from Musk, backed by some former OpenAI employees.