Microsoft Feared OpenAI Would Jump to Amazon, Badmouth Azure

Intimate details regarding the formative period of the partnership between Microsoft and OpenAI have come to light this week through recently unsealed court documents.

During a period when OpenAI was actively engaged in developing AI-driven gaming bots, Microsoft CEO Satya Nadella and OpenAI CEO Sam Altman were laying the groundwork for what would become a pivotal AI collaboration. Filings from the ongoing Musk v. Altman legal proceedings have offered an unprecedented glimpse into the internal discussions among Microsoft's senior leadership concerning their investment in OpenAI, revealing anxieties that the nascent AI startup might "storm off to Amazon" and "shit-talk" Microsoft.

In the summer of 2017, shortly after OpenAI showcased an AI bot defeating a professional Dota 2 player, Altman replied to Nadella's congratulatory message with a proposition for a substantially larger partnership designed to finance OpenAI's subsequent phase of AI research. OpenAI required significant computational resources to scale its Dota 2 initiative, far exceeding the Azure credits it was then receiving from Microsoft. Altman estimated this need at "probably something like $300 million at Azure list prices," a figure that initially caused considerable apprehension among some Microsoft executives.

Jason Zander, then Microsoft's Azure chief, articulated his concerns in an August 2017 email to Nadella, stating, "For those numbers to make sense we’d have to be generating significant incremental revenue directly due to the deal ($500 million+) that couldn’t be gained in a more efficient way."

Several months subsequent, Altman presented an alternative proposal, aiming to "create a partnership with Xbox around gaming, and an open offer to share their technology and IP in exchange for expanded sponsorship for their Dota research," as relayed by Brett Tanzer, currently VP of Azure solutions and ecosystem. While the Xbox team expressed interest in "exploring collaboration opportunities," they were unable to commit to the substantial research expenditures independently.

In January 2018, Microsoft CTO Kevin Scott contributed to the internal discussion regarding providing OpenAI with additional Azure credits for its research, communicating his thoughts to Nadella via email. Scott voiced uncertainty about what Microsoft stood "to get out of [the deal]" and questioned how the Dota-related endeavors would ultimately benefit the corporation. However, he expressed significant apprehension about OpenAI potentially aligning with Microsoft's primary cloud competitor.

In the same January 2018 email, Scott articulated a critical consideration: "I guess the other thing to think about here is the PR downside of us not funding them, and having them storm off to Amazon in a huff and shit-talk us and Azure on the way out." He further acknowledged OpenAI's rapid ascent, noting, "They are building credibility in the AI community very fast, recruiting well, and are going to be an an influential voice. All things equal, I’d love to have them be a Microsoft and Azure net promoter. Not sure that alone is worth what they’re asking."

A year subsequent, in an email addressed to Nadella and Microsoft co-founder Bill Gates, Scott confessed to having been "highly dismissive" of the AI initiatives at both OpenAI and Google DeepMind during their earlier competition to see who "could achieve the most impressive game-playing stunt." Scott's perspective shifted significantly when OpenAI began focusing on natural language processing models, leading him to fear that Microsoft might lag behind Google's advancements in AI. Just one month after Scott's detailed "thoughts on OpenAI" email, Microsoft publicly declared its monumental $1 billion investment in the company.

Fast forward nearly seven years, and this once-close partnership, now described as a "situationship," has culminated in OpenAI renegotiating its agreement with Microsoft to extend the availability of its AI models, Codex, and other proprietary tools to Amazon Web Services (AWS). This recent modification to their deal was unveiled mere days after the very "shit-talk" from OpenAI that Scott had once anticipated. Last month, OpenAI informed its workforce that its existing arrangement with Microsoft had "also limited our ability to meet enterprises where they are — for many that’s [Amazon] Bedrock."