Tech titan Microsoft has given OpenAI the green light to ink deals with rival cloud providers after questioning the ChatGPT creator’s ability to generate returns in the event of a server overbuild.
In January of 2023, Microsoft committed $10 billion to OpenAI to become its exclusive cloud provider through the end of the decade in exchange for shares in revenue and future profits, reports The Information.
But the relationship eventually hit a snag as OpenAI pressed Microsoft to supply the capacity it needed to feed the ChatGPT creator’s growing demand for compute. But Microsoft faced challenges in building new data centers to cater to OpenAI’s needs, such as energy and construction constraints.
A person at the center of negotiations between Microsoft and OpenAI says the exclusive cloud deal has sparked tensions between the two AI giants.
“There are people inside both companies that hate this thing. There are people inside Microsoft that don’t like it. There are people inside OpenAI that don’t like it. They have lots of reasons for not liking it.…The people who don’t like what’s going on tend to be further away from the details than the people who do know what’s going on…
Are there tense moments in the conversations? Absolutely. That’s what happens.…You still go and you figure it out.”
The resolution came last year after OpenAI CEO Sam Altman and Microsoft chief executive Satya Nadella agreed to break up the exclusivity agreement. Microsoft acknowledged that it is not in a position to satisfy OpenAI’s insatiable server needs and allowed the firm to rent servers from Oracle and other competitors.
People with knowledge of the matter say Microsoft CFO Amy Hood and her staff told colleagues that the firm would be in a risky position if it continued to be the sole cloud provider for OpenAI. Hood believes that OpenAI’s demands could lead to a server overbuild that might not generate financial returns.
In September, reports emerged that OpenAI plans to spend $450 billion through 2030 to rent servers from cloud providers.
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