Microsoft, Apple abandon OpenAI amid antitrust scrutiny

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Microsoft has resigned from its observer seat on OpenAI’s board, while Apple will not take a similar position due to increasing scrutiny from global regulators over big tech companies’ investments in AI startups.

Microsoft, which has invested $13 billion in the creator of generative AI chatbot ChatGPT, said in a letter to OpenAI that its withdrawal from its board would be “immediately effective.”

Apple was also expected to take an observer role on OpenAI’s board as part of a deal to integrate ChatGPT into the iPhone maker’s devices, but it will not do so, according to a person with direct knowledge of the matter. Apple declined to comment.

Instead, OpenAI will hold regular meetings with partners like Microsoft and Apple, and investors Thrive Capital and Khosla Ventures — as part of a “new approach to informing and engaging key strategic partners” under the leadership of Sarah Friar, a former Nextdoor executive who was hired as its first CFO last month, an OpenAI spokesperson said.

The decision also comes as antitrust authorities in the EU and US are investigating the partnership between Microsoft and OpenAI amid broader competition concerns in the rapidly growing sector.

Microsoft took on a non-voting board role after the chaos that engulfed OpenAI last year, when its CEO Sam Altman was abruptly fired by the board and then reinstated just days later. The attempted board coup threatened OpenAI’s valuation and, with it, Microsoft’s multibillion-dollar investment in the company.

“This position provided insight into the board’s activities without compromising its independence,” Microsoft deputy general counsel Keith Dolliver wrote in a letter to OpenAI late Tuesday. Since then, “we have seen significant progress from the newly formed board and are confident in the direction the company is headed.” Microsoft’s role on the board was therefore no longer “necessary,” he said.

As Dolliver wrote, OpenAI remains one of Microsoft’s “most valued partners.”

The Microsoft partnership has been crucial to OpenAI’s success. The startup has relied on Microsoft for billions of dollars of compute and cloud storage. Microsoft CEO Satya Nadella was a key power broker during OpenAI’s board shakeup in November.

The OpenAI investment has also catapulted Microsoft into an early lead in the generative AI race. The company said in April that it was struggling to keep up with demand for its AI services, which have helped drive sales of its Azure cloud computing platform at an accelerated pace over the past three quarters.

Microsoft doesn’t have a conventional equity stake in the startup. Instead, it’s entitled to a share of the OpenAI subsidiary’s profits, up to a certain limit.

According to its website, OpenAI “remains a completely independent company operated by OpenAI Nonprofit.”

Microsoft and OpenAI have downplayed their ties as antitrust concerns have grown. The European Commission said in June it was exploring the possibility of opening an antitrust investigation into the merger after saying it would not pursue an investigation under merger control rules. The U.S. Federal Trade Commission has also begun scrutinizing investments by big tech companies, including Microsoft, Amazon and Google, in generative AI startups.

An OpenAI spokesperson said: “We are grateful to Microsoft for expressing their confidence in our management and the direction of the company, and we look forward to continuing our successful partnership.”

OpenAI’s eight-person board includes Altman, Larry Summers, a former U.S. Treasury secretary, and Fidji Simo, CEO of grocery delivery company Instacart. It is chaired by Bret Taylor, a former Salesforce co-CEO and co-founder of AI startup Sierra.

Additional information provided by Michael Acton in San Francisco