Global: Microsoft Labels OpenAI as Both ‘Strategic Partner’ and ‘Competition’ in SEC Filing

In a recent SEC filing, Microsoft has presented its relationship with OpenAI in a nuanced light, describing it as both a strategic partnership and a competitive rivalry. The report, a Form 10-K detailing the company’s financial performance and conditions, reveals Microsoft’s complex stance on its association with OpenAI.

The filing outlines Microsoft’s competitive landscape, naming numerous rivals across various sectors, including tech giants like Apple and Nintendo, as well as several software and coding organizations. Despite this extensive list of competitors, OpenAI is highlighted uniquely as a “strategic partner” throughout the document.

The term “partner” or its variations appear 72 times in the filing. However, OpenAI is the only entity explicitly named as a partner. Most other references are general mentions of “Microsoft partners” and “our partnerships.”

This emphasis on OpenAI as both a strategic partner and a competitor is significant, particularly amid ongoing antitrust investigations. Both the UK and EU began probing Microsoft and OpenAI’s partnership in late 2023, with the US Justice Department and Federal Trade Commission joining the scrutiny in early 2024 over concerns about their influence in the AI industry.

The relationship between Microsoft and OpenAI has evolved substantially since Microsoft’s initial $1 billion investment in July 2019, which secured it as OpenAI’s exclusive cloud provider. This investment effectively pre-empted the launch of ChatGPT. Following ChatGPT’s debut, Microsoft further invested $10 billion, gaining early and semi-exclusive access to integrate GPT-4 into its own services like “Copilot” and “Bing.”

In 2023, OpenAI faced internal turmoil, including the temporary ousting of CEO and co-founder Sam Altman. During this period, Microsoft offered to hire Altman and other potential defectors, even creating a dedicated division for them. Altman was eventually reinstated, and the board was restructured to include a Microsoft observer seat, which Microsoft relinquished in July 2024, citing the seat as no longer necessary.

While these developments are under regulatory scrutiny, the situation underscores the intricate dynamics of Microsoft and OpenAI’s relationship, which appears to straddle the line between collaboration and competition.