Unlock Editor’s Digest for free
FT editor Roula Khalaf picks her favorite stories in this week’s newsletter.
Microsoft has given up its observer seat on OpenAI’s board, while Apple will not take a similar position, amid growing scrutiny from global regulators of Big Tech’s investment in AI startups.
Microsoft, which invested $13 billion in generative artificial intelligence chatbot maker ChatGPT, said in a letter to OpenAI that his withdrawal from the board role would be “effective immediately.”
Apple was also expected to take an observer role on OpenAI’s board as part of the deal to integrate ChatGPT into the iPhone maker’s devices, but will 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 like Microsoft and Apple and investors Thrive Capital and Khosla Ventures — part of a “new approach to informing and engaging key strategic partners” led by Sarah Friar, the former Nextdoor boss who was hired as its first boss. CFO last month, an OpenAI spokesperson said.
The move also comes as antitrust authorities in the EU and US are investigating the Microsoft-OpenAI partnership as part of wider competition concerns in the fast-growing sector.
Microsoft took a non-voting role on the board following the chaos that engulfed OpenAI last year, when its chief executive Sam Altman was abruptly fired by the board before being reinstated days later. An attempted coup in the boardroom threatened the award of OpenAI and with it Microsoft’s multibillion-dollar investment in the company.
“This position provided insight into the activities of the board without compromising its independence,” Microsoft deputy general counsel Keith Dolliver wrote in a letter to OpenAI late Tuesday. Since then, “we’ve seen significant progress from the newly formed board and we believe in the direction of the company.” Therefore, Microsoft’s role on the board is no longer “essential,” he said.
OpenAI remains one of Microsoft’s “most valuable partners,” Dolliver wrote.
Microsoft’s partnership has been critical to OpenAI’s success. The start-up relied on Microsoft for billions of dollars worth of computing power and cloud storage. Microsoft CEO Satya Nadella was a key power broker during the uproar in the boardroom at OpenAI in November.
Investments in OpenAI have also propelled Microsoft into an early lead in the generative AI race. The company said in April it was struggling to keep up with demand for its AI services, which helped boost sales on its Azure cloud platform over the past three quarters.
Microsoft does not have a conventional equity stake in the start-up. Instead, it is entitled to a share of the profits from the OpenAI subsidiary, up to a certain limit.
According to OpenAI’s website, it “remains a completely independent company managed by the non-profit organization OpenAI”.
Microsoft and OpenAI played down their ties as antitrust concerns grew. The European Commission said in June it was exploring the possibility of an antitrust investigation into the merger after saying it would not pursue an investigation under merger control rules. The US Federal Trade Commission has also begun investigating investments by major tech companies including Microsoft, Amazon and Google in generative AI start-ups.
An OpenAI spokesperson said: “We are grateful to Microsoft for expressing confidence in the board and direction of the company and look forward to continuing our successful partnership.”
OpenAI’s eight-member board includes Altman, as well as former US Treasury Secretary Larry Summers and Fidji Simo, CEO of grocery delivery company Instacart. It is chaired by Bret Taylor, former co-CEO of Salesforce and co-founder of AI start-up Sierra.
More news from Michael Acton in San Francisco