OpenAI and Microsoft’s Partnership Hits Turbulence, But What Really Happened?

OpenAI and Microsoft face mounting strain in their once-cozy collaboration. OpenAI plans to transform into a public-benefit corporation and acquire Windsurf, a coding startup valued at around $3 billion. That adds friction. Microsoft now holds exclusive rights to any new IP under their existing deal, meaning all Windsurf code would go straight to Azure-based tools such as GitHub Copilot.

OpenAI pushes back. It wants freedom from Microsoft’s compute and IP controls and aims to use Google Cloud, Oracle, and CoreWeave alongside Azure. Meanwhile, Microsoft resists, demanding a bigger stake in the restructured company and continued preferential access to OpenAI’s tech, especially if OpenAI ever reaches advanced AI levels.

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Negotiations have stalled. OpenAI staff have discussed filing antitrust complaints and seeking federal review of their contract, what insiders call the “nuclear option”. In response, Microsoft’s stock dropped slightly amid investor jitters.

Despite the tension, both firms insist they remain committed to their long-standing alliance. Still, the stakes are high as OpenAI faces a year-end restructuring deadline or risks losing as much as $20 billion in financing. Microsoft wants assurance it won’t lose access to future breakthroughs, and OpenAI wants flexibility to grow. Their next steps may determine whether this flagship partnership evolves or fractures.

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