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- OpenAI can now sell products on Amazon and Google Cloud, expanding enterprise reach
- Microsoft aims to reduce reliance on OpenAI by developing its own AI models
- Ending exclusivity may ease antitrust scrutiny in US, UK, and Europe
- OpenAI’s demand on Amazon’s cloud described as staggering in internal memo reported by CNBC
- Barclays analysts say deal frees Microsoft capital for Copilot and boosts cloud capacity
April 27 (Reuters) – Microsoft is losing exclusive access to OpenAI’s technology, clearing the way for the ChatGPT creator to sell its products across rival cloud platforms in a sweeping change to one of the artificial intelligence era’s most consequential alliances.
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The reworked tie-up, announced jointly by the companies on Monday, retains Microsoft as OpenAI’s primary cloud partner with a license to the startup’s intellectual property through 2032.
But the software giant will no longer share revenue for the OpenAI products it sells on its cloud. Revenue OpenAI must share with Microsoft through 2030 will now have a cap for the total number and no longer tied to the startup’s technology milestones – including if it achieves artificial general intelligence, the point at which AI matches or surpasses human ability.
The change is meant to simplify a complex relationship between OpenAI and its one of its biggest and earliest backers.
Microsoft’s early bet on OpenAI allowed the company to roll out AI across its products and powered sales growth at its Azure cloud-computing business, turning the company into one of one the biggest players in the high-stakes race for the technology.
But tensions have been rising between the companies as OpenAI strikes cloud deals with rival providers to secure more computing power and build out an enterprise business that can compete better with Anthropic ahead of a potential IPO.
The Financial Times reported last month Microsoft was weighing legal action against Amazon and OpenAI over a $50 billion cloud deal that may breach its exclusive cloud tie-up.
In an internal memo reported by CNBC, OpenAI said that the Microsoft partnership had been foundational but had limited the startup’s enterprise reach, adding that demand since OpenAI launched on Amazon’s cloud had been staggering.
The reworked partnership clears the way for OpenAI to run its services on Amazon’s cloud platform without the technical modifications required by the previous Microsoft deal, according to a person familiar with the matter.
Amazon is expected to hold an event on Tuesday in San Francisco where executives from OpenAI will appear for a joint announcement, according to a posting on Amazon’s website.
“The new deal with Microsoft was essential for OpenAI to be successful in the enterprise market,” said Gil Luria, analyst at D.A. Davidson & Co. “AWS and Google Cloud enterprise customers have been limited in their ability to integrate OpenAI’s products because of the exclusive relationship and will now be more likely to consider OpenAI alongside Anthropic,” he added.
MICROSOFT WORKS TO REDUCE OPENAI RELIANCE
Microsoft (MSFT.O) shares initially fell 1.3% on the news but were trading little changed by late morning trading.
Alphabet (GOOGL.O) and Amazon (AMZN.O) both did not immediately respond to Reuters’ requests for comment. Alphabet shares were up 1.5%, while Amazon was down 0.5%.
Microsoft and OpenAI had also announced restructured their tie-up in October, removing major constraints on the startup’s ability to raise capital and secure computing resources.
The software giant has in recent months been working to reduce its reliance on OpenAI by developing its own AI models and rolling out those developed by the likes of Anthropic in its products including the 365 Copilot for enterprises.
It has also said that it has been constrained on AI capacity, which has limited growth for its cloud business.
“From Microsoft’s perspective, it does not need to build out all the data center needs for OpenAI, freeing up capital for Copilot and other cloud capacity,” Barclays analysts said, calling the move a positive for both Microsoft and OpenAI.
Ending the exclusivity pact may help Microsoft fight antitrust scrutiny in the UK, the U.S. and Europe over whether its OpenAI tie-up give it an unfair advantage in the cloud and enterprise AI markets.
Reporting by Aditya Soni and Akash Sriram in Bengaluru and Stephen Nellis in San Francisco, additional reporting by Anhata Rooprai; Editing by Mrigank Dhaniwala, Nick Zieminski, Arun Koyyur
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