Microsoft sees OpenAI as an existential threat
Satya Nadella's recent interview reveals that tensions are high betwen MSFT and OpenAI
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The writing’s on the wall: Microsoft and OpenAI may be headed for an ugly divorce.
Satya Nadella just went on a podcast with Dwarkesh Patel and delivered a measured but pointed message: enterprise AI adoption is slow, and AGI is a long way off, perhaps even a “non-sensical benchmark hacking.” This is a departure from the usual tech CEO stance of cheerleading AI adoption. So what’s going on here?
In my view, the entire podcast was Satya delivering a message to Sam Altman, as OpenAI moves forward with its ambitions to dominate the enterprise AI and AI agent market—perhaps at Microsoft’s expense.
Cracks in their partnership were already showing late last year, when OpenAI initiated its transition to a for-profit company. This forced Microsoft and OpenAI to renegotiate their partnership agreement, which includes the infamous “AGI clause,” stating that OpenAI can refuse to license any model considered “AGI” to Microsoft (more on that later).
But this exposes Microsoft to the risk of getting “rug-pulled” by OpenAI, stuffing Microsoft with the low margin business of offering commodity LLMs while OpenAI vacuums up all profits in the application layer using its “AGI” models. Clearly, this is a nightmare scenario for Satya Nadella, considering Microsoft already lost the consumer AI market to OpenAI and fumbled the bag on GitHub Copilot and Copilot for Microsoft.
Thus, Satya’s interview is the first public affirmation of how OpenAI—once Microsoft’s crown jewel—has turned into a noose around its neck. In response, Microsoft may begin a campaign to regain leverage over OpenAI. In this post, we will go over the key highlights of Satya’s interview and the new competitive dynamic between Microsoft and OpenAI.