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Microsoft Revises Relationship with OpenAI: From Partner to Potential Competitor

Key Points:

- Microsoft ranks OpenAI as a competitor in its annual report to the SEC.
- Integration of OpenAI models into Microsoft products continues, but competition grows.
- FTC investigates relationship between cloud providers and artificial intelligence startups.
- Microsoft develops its AI division with strategic hires from Inflection AI.

In a document filed Tuesday with the U.S. Securities and Exchange Commission (SEC), Microsoft surprised the tech industry by calling OpenAI, the startup behind ChatGPT, a "competitor" for the first time. This move marks a significant shift in the narrative of their relationship, at a time when collaboration between the two companies has reached new heights.

Despite Microsoft’s $13 billion investment in OpenAI and the tight integration of OpenAI’s AI models into Microsoft’s enterprise and consumer products, the new classification highlights the complexity and dynamism of relationships in the technology industry. In its annual 10-K report, Microsoft included OpenAI in a list of competitors that also includes Anthropic, Amazon and Meta. In addition, OpenAI was listed as a competitor in search due to the recent introduction of SearchGPT.

This move could be interpreted as a strategy by Microsoft to mitigate antitrust concerns. The Federal Trade Commission (FTC) is currently examining the relationship between cloud providers and AI startups. In this context, Microsoft has relinquished its observer seat on the OpenAI board, a position it acquired after last fall’s tumult when the OpenAI board temporarily fired CEO Sam Altman.

The history of Silicon Valley shows that being partners and competitors is not a contradiction. A case in point is the collaboration between Yahoo and Google in the early 2000s, when Yahoo was using Google’s search results. Despite the collaboration, Google quickly emerged as the undisputed leader in online search, surpassing Yahoo. This kind of dynamic could be reflected in the relationship between Microsoft and OpenAI.

Microsoft, however, is not staking all its cards on OpenAI. In March, the company hired Mustafa Suleyman and Karén Simonyan, co-founders of Inflection AI, to lead the new Microsoft AI division. This indicates a significant commitment by Microsoft to developing an AI ecosystem independent of OpenAI.

These developments show how Microsoft is trying to balance collaboration with OpenAI and the development of its own technologies, while keeping a watchful eye on the competitive dynamics of the industry. The transition from partners to competitors could shape the future of their relationship and the AI landscape.