At OpenAI, Signs of Crisis Grow Behind the Scenes

OpenAI is still reeling from the disappointing launch of its latest GPT-5 model. It’s being pelted with lawsuits from left and right, for alleged crimes like mass copyright infringement and colluding to ice out its competitors. More than ever, it’s being criticized for its chatbot’s alarming proclivity to not only give dangerous advice, but convince people to actually take it with its beguiling and sycophantic charm — a deeply weird phenomenon that’s already led to several alleged deaths.

Behind the scenes, things aren’t looking any better. Tens of billions of dollars in investment hangs in the balance for the Sam Altman-led company as it struggles to squirm out from under the thumb of Microsoft, its longtime monetary sugar daddy. And now, the Financial Times reports, it’s looking like OpenAI’s attempts to do that by negotiating a new deal with the software titan is going to drag on till next year — and hold up astronomical sums of money in the process.

Microsoft has backed OpenAI with more than $13 billion in funding. Its initial $1 billion cash injection into the then-underdog startup in 2019 is arguably what helped kickstart this entire AI gold rush. In return, the Redmond giant received exclusive rights to OpenAI’s intellectual property and access to its software.

Needless to say, it’s been a lucrative arrangement for both parties. OpenAI owns the world’s most popular chatbot and is eyeing a $500 billion valuation. Microsoft gets to be among the top of the pack in the AI race and has seen its own market cap more than triple to nearly $4 trillion.

But OpenAI is a big boy now, and wants to cut its own deals with other tech heavyweights. It‘s spent the past year trying to convert itself into a public benefit corporation, even as it was forced to abandon its plan to put its for-profit arm in charge of the company.

As part of that corporate restructuring, according to the FT’s sources, it’s gunning to partner up with Google and Amazon Web Services to host its AI models, in an arrangement similar to its competitor Anthropic. That would drive up its revenue, the thinking goes.

The problem is that Microsoft currently has exclusive rights to host OpenAI’s servers on its Azure cloud service, and doesn’t have good reason to relinquish them. One FT source said that Microsoft and OpenAI are negotiating a stricter agreement that would allow OpenAI to only serve government customers not on Azure.

Another battleground is a clause that ends the partnership if OpenAI achieves artificial general intelligence, or AGI, a nebulous term that describes a powerful AI model that rivals or exceeds human levels of intelligence. OpenAI specifically defines it as a a “highly autonomous system that outperforms humans at most economically valuable work.”

Microsoft isn’t a fan of the clause. In theory, OpenAI could spuriously claim it’s built an AGI and it’d evaporate the company’s treasured exclusive rights. CEO Satya Nadella particularly has it out for the very idea of AGI: in a recent interview he remarked that declaring an AGI milestone was “nonsensical benchmark hacking.” If a new deal is to proceed, Microsoft wants the AGI clause gone. But OpenAI, optimistic that’ll come out on top, is trying to keep it in some form.

“OpenAI having the AGI clause is negotiating chit,” a person with knowledge of the negotiations told the FT. “It’s a threat, but it’s more like mutually assured destruction because if it doesn’t go by year-end, they won’t be able to raise any money again and Sam [Altman] knows that.”

The pressure is on to clinch the deal — and fast. In a March funding round, Japanese multinational investment firm SoftBank committed $40 billion in funding towards that ChatGPT maker, but with a catch: if OpenAI doesn’t reach a new agreement with Microsoft by the end of the year and complete its corporate restructuring, it’ll withhold $10 billion.

Considering that Altman just boasted that OpenAI’s will spend trillions of dollars on AI data centers while in the same breath warning that an AI bubble is on the horizon, it’s an investment it can’t afford to lose. Its executives, however, are confident SoftBank will come up with the goods anyway, according to the FT.

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