Unlock Editor’s Digest for free
Roula Khalaf, editor-in-chief of the FT, selects her favourite stories in this weekly newsletter.
Microsoft has given up its seat as an observer on OpenAI’s board of directors, while Apple will not take a similar position, amid increasing scrutiny by international regulators over Big Tech’s investments in AI startups.
Microsoft, which has invested $13 billion in the maker of generative AI chatbot ChatGPT, said in a letter to OpenAI that his resignation from his board role would be “effective immediately.”
Apple was also expected to take an observer role on OpenAI’s board of directors as part of a deal to integrate ChatGPT into the iPhone maker’s devices, but would not do so, according to a person with direct knowledge of the matter. Apple declined to comment.
OpenAI would instead hold regular meetings with partners including Microsoft and Apple and investors Thrive Capital and Khosla Ventures — part of “a new approach to inform and engage key strategic partners” under Sarah Friar, the former Nextdoor boss who was hired last month as the company’s first chief financial officer, an OpenAI spokesperson said.
The move also comes as competition authorities in the EU and US investigate Microsoft and OpenAI’s collaboration as part of broader competition concerns in the fast-growing sector.
Microsoft accepted a non-voting role on the board of directors following the chaos that engulfed OpenAI last year when its CEO Sam Altman was abruptly fired by the board, only to be reinstated days later. The attempted coup threatened OpenAI’s valuation, and with it Microsoft’s multibillion-dollar investment in the company.
“This role provided insight into the board’s activities without compromising its independence,” Keith Dolliver, Microsoft’s deputy general counsel, wrote in a letter to OpenAI Tuesday night. Since then, “we have seen significant progress from the newly formed board and are confident in the direction the company is headed.” As a result, Microsoft’s role on the board was no longer “necessary,” he said.
OpenAI remains one of Microsoft’s “most valued partners,” Dolliver wrote.
The Microsoft partnership has been crucial to OpenAI’s success. The startup has relied on Microsoft for billions of dollars’ worth of computing power and cloud storage. Microsoft CEO Satya Nadella was a key power broker during OpenAI’s boardroom shakeup in November.
Investing in OpenAI has also propelled Microsoft to 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 been driving sales on its Azure cloud computing platform at an accelerated pace over the past three quarters.
Microsoft does not have a conventional equity stake in the startup. Instead, it is entitled to a share of the profits of a subsidiary of OpenAI, up to a certain limit.
According to OpenAI’s website, it remains a “fully independent company governed by the OpenAI Nonprofit.”
Microsoft and OpenAI have downplayed their ties as antitrust concerns mount. The European Commission said in June it was examining the possibility of an antitrust investigation into the partnership after saying it would not proceed with an inquiry under merger control rules. The Federal Trade Commission in the U.S. has also begun investigating investments made by Big Tech companies including Microsoft, Amazon and Google in generative AI startups.
An OpenAI spokesperson said: “We are grateful to Microsoft for the confidence it has placed in the board and direction of the company, and we look forward to continuing our successful partnership.”
OpenAI’s eight-person board of directors includes Altman and Larry Summers, former U.S. Treasury Secretary, and Fidji Simo, CEO of grocery delivery company Instacart. The board is chaired by Bret Taylor, former co-CEO of Salesforce and co-founder of AI startup Sierra.
Additional reporting by Michael Acton in San Francisco