Microsoft and OpenAI reached an agreement to simplify their partnership through major changes, including breaking off exclusivity rights, marking the latest move to loosen the close tie-up that helped unleash an artificial intelligence boom.
"The rapid pace of innovation requires us to continue to evolve our partnership to benefit our customers and both companies. Today, we are announcing an amended agreement to simplify our partnership and the way we work together, grounded in flexibility, certainty and a focus on delivering the benefits of AI broadly," Microsoft said in a statement on Monday.
"The greater predictability in the amended agreement strengthens our joint ability to build and operate AI platforms at scale while providing both companies the flexibility to pursue new opportunities," it added.
According to the details shared, Microsoft will no longer have exclusive access to OpenAI's artificial intelligence models and products, marking a significant change that will allow the startup to sell its technology across rival cloud platforms, including Amazon and Google.
Microsoft also said it will no longer pay a share of its revenue to ChatGPT maker OpenAI.
Following the joint announcement, Microsoft shares slipped about 1% in premarket trading on Monday as some investors saw the shift as the company losing a valuable competitive advantage.
Microsoft has, in recent years, emerged as a major player in the AI race, benefiting from its early bet on OpenAI that allowed it to quickly launch AI technology across its products.
But tensions have been rising between the companies over the tie-up as OpenAI strikes cloud deals with rival companies and investors scrutinize Microsoft's alliance with OpenAI.
OpenAI, meanwhile, relied exclusively on Microsoft's investments in cloud computing services to build the technology that helped make ChatGPT a household name. Microsoft, in turn, relied on OpenAI's technology to build its own AI assistant Copilot.
But the partnership has evolved as San Francisco-based OpenAI, founded as a nonprofit, has shifted to a capitalistic enterprise on a path toward an initial public offering on Wall Street and has balanced its reliance on Microsoft with other cloud partners like Amazon, Google and Oracle.
OpenAI said Monday it will continue to pay Microsoft a share of its revenue through 2030, according to The Associated Press (AP).
The two companies said Microsoft remains the primary cloud computing partner for OpenAI, and products made by the AI company will ship first on Microsoft's cloud platform, called Azure, "unless Microsoft cannot and chooses not to support the necessary capabilities.”
Microsoft also said it "continues to participate directly in OpenAI’s growth as a major shareholder. "
Wedbush Securities analyst Dan Ives said in a note to investors Monday that the new agreement "puts OpenAI on a strong path forward to going public through IPO, given its clearer opportunity in the cloud environment while reducing significant barriers from its original partnership with Microsoft.”
Ives said it's also important for Microsoft as it "looks to develop tech independence from OpenAI" in advancing Copilot's capabilities and partnering with other AI providers such as OpenAI rival Anthropic, maker of the chatbot Claude.
The announcement on the amended agreement comes as OpenAI faces Elon Musk in a major legal battle this week, which could shape the future of AI giant.
