LoaderSave StorySave this storyCommentLoaderSave StorySave this storyOpenAI’s relationship with Microsoft, its longtime investor and cloud partner, has grown increasingly complicated over the years as the ChatGPT-maker has grown into a behemoth competitor.
But Microsoft executives had reservations about sending additional funding to OpenAI as far back as 2018 when it was just a small nonprofit research lab, according to emails between more than a dozen Microsoft executives, including CEO Satya Nadella, shown in a federal court on Thursday during the Musk v. Altman trial.
The emails show how Microsoft, at the time, wavered over what has since been held up as one of the most successful corporate partnerships in tech history. Several Microsoft executives said in the emails their visits to OpenAI did not indicate any imminent breakthroughs in developing artificial general intelligence. In 2017, much of OpenAI’s work was focused on building AI systems that could play video games, which showed early signs of success. But OpenAI needed five times more computing power than it had originally secured from Microsoft to continue the project.
Microsoft worried that not providing support could push OpenAI into the arms of Amazon, the world’s dominant cloud computing provider at the time. Roughly 18 months after the emails were sent, Microsoft announced a landmark $1 billion investment in OpenAI after the lab created a for-profit arm that provided the tech giant with the potential to generate a return of $20 billion.
Elon Musk’s attorneys introduced the emails to show Microsoft’s evolving relationship with OpenAI. After Musk reached out to Nadella, Microsoft in 2016 agreed to provide $60 million worth of cloud computing services to OpenAI at a steep discount. OpenAI consumed the services twice as fast as expected.
The email chain kicked off on August 11, 2017 with Nadella reaching out to OpenAI CEO Sam Altman to congratulate the lab on winning a video game competition using AI to mimic a human player. Ten days later, Altman responded seeking $300 million worth of Microsoft Azure cloud computing services.
“We could figure how to fund some of it but not that much,” Altman wrote, apparently seeking a financial handout and engineering help. “I think it will be the most impressive thing yet in the history of AI.”
Nadella asked four lieutenants for their input on how to respond three days later. Microsoft’s AI team saw “no value in engaging,” according to a response from Jason Zander, Microsoft’s executive vice president, that also documented how other teams felt. Its research team thought its own work was “more advanced,” while the public relation teams didn’t like the idea of supporting a group pushing the idea of “‘machines beating humans.’” Ultimately, Zander suggested that Azure would benefit from associating with Musk and Altman but that he wouldn’t want to “take a complete bath,” or large financial hit, in doing so.
A subsequent analysis showed that Microsoft stood to lose about $150 million over several years if it provided the services Altman wanted, according to one email. "Unless he can help us draw a more direct networking effect with OpenAI->Microsoft business value, we will wind up having to pass,” Zander wrote.
The thread went dark for several months, but was revived on January 10, 2018 with an email to Nadella from Brett Tanzer—who signed off his emails with “Brettt”—then a director on the Azure cloud unit. Altman had told Tanzer that OpenAI could license its gaming AI to Microsoft’s Xbox video game division in exchange for “$35-50 million in Azure Credits.” But Xbox couldn’t commit that much money. Microsoft planned to tell Altman there would be no more discounts after that March, per Tanzer’s email.
Nadella forwarded the email to 15 Microsoft executives later that day, asking for their thoughts on OpenAI and sharing some of his own.
“Overall I can’t tell what research they are doing and how if shared with us it could help us get ahead,” said Nadella. “From what Elon is telling everyone… he feels Open AI is at verge of some big AGI breakthroughs… They clearly are pushing AI at a level none of our first party or third parties are.”
Microsoft chief technology officer Kevin Scott responded that he wasn’t sure what the company would get out of an incremental investment in OpenAI. However, he said, there could be some PR downsides associated with not funding them, “and having them storm off to Amazon in a huff and shit-talk us and Azure on the way out.”
“I’m highly skeptical of an imminent breakthrough in AGI,” Scott said. “IMO, they’re treating us like a bucket of undifferentiated GPUs, which isn’t interesting for us at all. They are not out there saying ‘there’s this critical piece of research that we can only do on Azure because of its technical differentiation.’ If they were, that could be interesting marketing.”
Zander responded the same day, reiterating Scott’s concerns around Amazon.
“My worst case scenario is having them ditch Azure for AWS, as Kevin says bad-mouth us on the way over, and then land with some big new innovation that is shared with our competitors,” said Zander. (Over the past few months, OpenAI committed to spend $138 billion on Amazon cloud computing services, and Amazon agreed to invest $15 billion to $50 billion in OpenAI.)
The next day, Microsoft’s chief scientific officer Eric Horvitz responded, expressing similar reservations about funding OpenAI while commending the team for sharing its research. “I’d like to see Microsoft Research folks and others at Microsoft work collaboratively with OpenAI without the need to supply many millions of dollars of support—unless we can identify other broader ecosystem or relationship benefits that have expected value somewhere near the dollars being requested,” he said.
Microsoft told Altman that no team inside the company would commit to sponsoring OpenAI. The duo later rekindled their relationship, though with Microsoft becoming OpenAI’s most prolific fiscal sponsor from 2019 through 2023, a period over which it committed $13 billion in cash and cloud computing credits. Musk’s lawsuit against OpenAI accuses Microsoft of aiding and abetting unauthorized use of the billionaire’s donations to the AI lab. Musk contends that Microsoft helped OpenAI develop a moneymaking machine that corrupted its nonprofit principles.
But apart from a few text messages—including Nadella ghosting then-OpenAI interim CEO Mira Murati as she sought advice in her new role—and the newly released email thread, Microsoft has largely been an afterthought in the trial. That won’t be the case on Monday, when Nadella takes the witness stand.
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