According to the Wall Street Journal, OpenAI CEO Sam Altman once said that OpenAI and Microsoft have the “best partnership in the technology industry.” However, this Silicon Valley “marriage” is already in jeopardy.


Nadella and Altman drift apart

In the past six years, Microsoft has greatly promoted the growth of OpenAI through billions of dollars of investment, helping ChatGPT accumulate more than 500 million weekly active users. At the same time, OpenAI provides Microsoft with cutting-edge generative AI tools, helping Microsoft's stock price triple.

Differences deepen

But that partnership has now become strained. According to people familiar with the relationship, Altman and Microsoft CEO Satya Nadella have increasingly disagreed on a number of issues, including the computing power Microsoft provides to OpenAI, the permission OpenAI gives Microsoft to use its models, and whether OpenAI will soon develop artificial general intelligence (AGI), which is AI with a level of intelligence comparable to humans.

To make matters worse, Nadella has also made it a priority to increase the sales and usage of his own Copilot (ChatGPT rival). Last year, he hired an Ultraman rival to secretly start a project to develop an AI model for Microsoft, hoping to reduce dependence on OpenAI.


The two CEOs had a close relationship

Although both sides are preparing to part ways, they still have huge influence over each other at a critical moment in the global race for artificial intelligence.

According to people familiar with the matter, Microsoft could actually block OpenAI's plan to reorganize into an independent for-profit company. If this transformation is not completed by the end of this year, OpenAI could lose tens of billions of dollars. So far, however, Microsoft has not threatened such action.

At the same time, people familiar with the matter revealed that OpenAI’s board of directors could trigger a clause in the contract that prevents Microsoft from accessing its most advanced technology. Some people familiar with the matter said that in the past year, OpenAI management has raised the possibility of triggering this clause.

A controversial executive recruitment

Without Altman's knowledge, Nadella began recruiting Mustafa Suleyman, one of Google DeepMind's three co-founders. Nadella lured him to Microsoft through a series of meetings, including one in Davos, Switzerland, in early 2024. At that meeting, Nadella also participated in a panel discussion with Altman.

In the end, Microsoft spent $650 million to successfully bring Suleiman and colleagues from its artificial intelligence startup Inflection to join the company. According to people familiar with the matter, Suleiman began to build a large language model, aiming to benchmark the most advanced model GPT-4 released by OpenAI at the time.


Nadella hires Suleiman to develop big model in secret

But the project got off to a rocky start. An early training test showed that building a model comparable to OpenAI was more difficult than expected, prompting Microsoft to extend its reliance on OpenAI.

People familiar with the matter said that at a meeting about sharing intellectual property, Suleiman loudly rebuked OpenAI’s lawyers in front of OpenAI executives, including Mira Murati, then OpenAI’s chief technology officer.

When will AGI arrive?

Another point of conflict is when OpenAI will be able to implement AGI. According to the agreement between the two parties, once OpenAI successfully develops an AGI model, its board of directors has the right to readjust its relationship with Microsoft. Altman said he's confident the team can achieve that goal soon.

However, in private, closed-door negotiations, Microsoft negotiators told OpenAI that current technology is still far from achieving AGI, according to people familiar with the matter. Nadella also dismissed the hype surrounding the AGI milestone on a popular podcast in February as nonsense and a play on benchmarks. He believes that the development of AI should not excessively pursue the AGI milestone.

People familiar with the matter said that OpenAI executives were surprised by Microsoft's view. At the same time, OpenAI hopes to obtain more computing power and the use of top chips from Microsoft, but Microsoft says it has provided everything it can and has relaxed exclusivity terms.

OpenAI's behavior also frustrated Microsoft last summer. At the time, OpenAI was making unusually slow progress in handing over the code for a powerful new inference model codenamed "Strawberry." OpenAI needed additional time to understand the model's capabilities, people familiar with the matter said.

Altman and Nadella now communicate less via text messages and more through scheduled weekly phone calls.

Microsoft and OpenAI were also negotiating an ambitious data center project, but Microsoft shelved the project after Altman was briefly ousted, people familiar with the matter said.

In January this year, Altman stood on the White House podium with Trump, SoftBank CEO Masayoshi Son, and Oracle co-founder Larry Ellison to announce the establishment of the Stargate joint venture, with a total investment expected to be as high as $500 billion.

This project is actually very similar to what Altman originally hoped to realize with Nadella. But at the time, Nadella was attending a meeting at the World Economic Forum in Davos, thousands of miles away.