Microsoft unexpectedly withdrew from its observer role on OpenAI’s board.
As first reported by Financial TimesKeith Dolliver, Microsoft's deputy general counsel, wrote in a letter to OpenAI that the corporate's board role was “now not crucial” given the “significant progress” made by OpenAI's newly formed board.
“Over the past eight months, now we have seen significant progress from the newly formed board and are confident within the direction of the corporate,” Dolliver wrote, signaling a vote of confidence in OpenAI's leadership while distancing Microsoft from any direct involvement.
Microsoft's non-voting observer seat on OpenAI's board was created in November 2023 after a period of turmoil on the AI company.
This led to the fast departure and rehiring of OpenAI CEO Sam Altman.
After investing billions in OpenAI, Microsoft sought to guard its interests and maintain oversight by taking over this board position.
But what is absolutely behind this recent restructuring of the board of directors?
While Microsoft is portraying this move as a natural evolution of its partnership with OpenAI, industry insiders suspect that regulatory pressure may very well be the driving force.
The timing is definitely surprising, because it coincides with increasing scrutiny by U.S. and European regulators over major technology corporations' investments in AI startups.
Alex Haffner, competition partner at law firm Fladgate, was convinced this was the case, as was the FT. “It is difficult to avoid the conclusion that Microsoft's decision was heavily influenced by the continued competition and antitrust scrutiny of its (and other major technology corporations') influence over emerging AI corporations resembling OpenAI,” Fladgate told The Register.
In fact, regulatory focus has been growing. In June, the U.S. Federal Trade Commission (FTC) began investigating investments by tech giants resembling Microsoft, Amazon and Google in generative AI startups.
Across the pond, the European Commission is exploring the potential for an antitrust investigation into the partnership between Microsoft and OpenAI, even though it has decided to not open an investigation under merger control rules.
Microsoft's exit from OpenAI's boardroom is especially notable given the partnership. The tech giant has invested over $10 billion in OpenAI since early 2023 and can receive early access to cutting-edge AI models in return.
This is a cornerstone of Microsoft's AI strategy and has given the corporate a head start within the highly competitive AI race.
The relationship between Microsoft and OpenAI stays intact
So what does this mean for the longer term of the connection between Microsoft and OpenAI?
Despite the departure from the board, the core partnership stays intact. Microsoft continues to be a key financial and technological resource for OpenAI, supporting the training of its AI models and services resembling ChatGPT with its vast computing resources.
However, this will not be the primary time we hear that the partnership between Microsoft and OpenAI will not be as close because it seems. In June last 12 months Insiders admitted that communication between the businesses was poor, which led to internal friction.
“Although our partnership with Microsoft involves a multi-billion dollar investment, OpenAI stays a very independent company managed by the OpenAI Nonprofit,” OpenAI has all the time stressed on his website.
OpenAI, for its part, appears to be taking a brand new approach to partner engagement. Instead of board representation, the corporate plans to carry regular meetings with key stakeholders, including Microsoft and other investors.
This strategy, driven by Sarah Friar, OpenAI's latest CFO, goals to keep up transparency with investors while strengthening the corporate's independence.
Apple is unlikely to sit down on OpenAI’s board
Again first reported by Financial TimesApple has also decided to not take an observer role on OpenAI's board, although this has not been officially confirmed.
Apple was originally expected to receive a non-voting observer seat on OpenAI's board as a part of an agreement to integrate ChatGPT into Apple devices.
Apple’s ambitious AI initiative “Apple intelligence”, OpenAI’s model adds to its phones, in a surprising mixture of Microsoft and Apple Products.
There are even rumors that Apple might add Google's Gemini models to its devices in a chimera of Apple, OpenAI and Google technologies.
Again, regulatory pressure may very well be key. Not way back, Apple announced that it will delay the delivery of key components of Apple Intelligence to EU users until 2025.
The confusion of competing interests and the associated data protection problems could change into untenable.
AI corporations could take proactive steps to forestall regulatory pressure from hindering their growth.
