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Microsoft, Apple drop OpenAI board seat plans amid growing clampdown

Microsoft, which invested $13 billion in the ChatGPT creator, will withdraw from its observer role on the board, the company said in a letter to OpenAI on Tuesday


Photo: Bloomberg

By Dina Bass and Leah Nylen

Microsoft Corp. and Apple Inc. dropped plans to take board roles at OpenAI in a surprise decision that underscores growing regulatory scrutiny of Big Tech’s influence over artificial intelligence.
Microsoft, which invested $13 billion in the ChatGPT creator, will withdraw from its observer role on the board, the company said in a letter to OpenAI on Tuesday, which was seen by Bloomberg News. Apple was due to take up a similar role, but an OpenAI spokesperson said the startup won’t have board observers after Microsoft’s departure.

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Regulators in the US and Europe had expressed concerns about Microsoft’s sway over OpenAI, applying pressure on one of the world’s most valuable companies to show that it’s keeping the relationship at arm’s length. Microsoft has integrated OpenAI’s services into its Windows and Copilot AI platforms and, like other big US tech companies, is banking on the new technology to help drive growth. 

Still, the board resignation is unlikely to resolve the US Federal Trade Commission’s concerns about Microsoft’s partnership with OpenAI, a source familiar with the agency’s thinking said. Other regulators will likely feel similarly because the change doesn’t alter Microsoft’s close ties to the startup, analysts at Bloomberg Intelligence said in a note on Wednesday.

“Microsoft ‘giving up’ its OpenAI board seat is just another gambit on the chessboard,” said Foxglove director Cori Crider, whose law firm is pushing for more antitrust scrutiny of the relationship. “Big Tech know they’re in a cat-and-mouse game with antitrust enforcers over AI.”

The Financial Times reported Microsoft’s exit earlier.

What Bloomberg Intelligence Says: 
The move by Microsoft and Apple to opt out as observers from the OpenAI board may be driven by regulatory pressure, but we don’t see this lessening their influence over the latter’s product strategy or ending the antitrust investigations. In the longer term, we see other cloud providers such as AWS or even Google to be preferred vendors for OpenAI as demand increases and it faces more scrutiny globally.

— Justin Teresi, BI Litigation Analyst and Anurag Rana BI Technology Analyst

AI Scrutiny
Microsoft is facing broader scrutiny over its alleged dominance of artificial intelligence. In January, the US Federal Trade Commission said it was looking into Microsoft’s investment in OpenAI as part of a broader inquiry into Big Tech companies and their partnerships with AI startups. Separately, the US is looking at whether the company properly notified antitrust agencies about its deal with an OpenAI rival, Inflection AI, people familiar with the matter have said. 

European regulators also said they were going to survey Microsoft’s rivals about OpenAI’s exclusive use of its technology, and the UK’s competition regulator is weighing a deeper investigation of the tie up. 

Microsoft isn’t being singled out. The UK is also looking into Inc.’s $4 billion collaboration with AI company Anthropic, expressing concern that large tech companies are using partnerships to “shield themselves from competition.” The US is probing Nvidia Corp.’s dominance over AI chips. 

Microsoft shares rose 0.4% to $461.38 at 11:31 a.m. in New York trading. Apple gained 1.1% to $231.19. 

Big Tech Investments
The biggest US tech companies including Microsoft as well as Nvidia, Alphabet Inc. and have poured tens of billions of dollars into AI businesses. While these investments and partnerships are a lifeline for the startups, regulators have expressed concern that they threaten to concentrate access to the most innovative large language models among the tech companies that already dominate other platforms. 

Tech giants are also striking non-financial agreements. These include Apple’s partnership with OpenAI to bring ChatGPT to the iPhone, and Microsoft’s decision earlier this year to bring on Inflection AI’s Mustafa Suleyman and most of his staff from the OpenAI rival.

Microsoft took on the non-voting observer role on OpenAI’s board last year, weeks after the startup’s directors had fired Chief Executive Officer Sam Altman in a dramatic coup over the direction of the company. Altman was quickly reinstated following a backlash from employees and the board was remade. 

Read More: The Doomed Mission Behind Sam Altman’s Shock Ouster From OpenAI

“We’re grateful to Microsoft for voicing confidence in the board and the direction of the company, and we look forward to continuing our successful partnership,” OpenAI said in a statement to Bloomberg News, without commenting directly on Apple or Microsoft’s decisions. 

OpenAI said that moving forward, the company will host regular stakeholder meetings with partners and investors, including Thrive Capital and Khosla Ventures, “to share progress on our mission and ensure stronger collaboration across safety and security.”

OpenAI began in 2015 as a nonprofit research organization, but later shifted its structure to include a for-profit startup that has solicited investments and struck commercial partnerships. 

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First Published: Jul 10 2024 | 11:36 PM IST

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