Microsoft No Longer OpenAI’s Exclusive Cloud Provider

According to reports from leading outlets like Bloomberg, Reuters, and CNBC, Microsoft—the largest investor in OpenAI and previously its exclusive cloud partner—has lost its designation as the sole provider of computing capacity for the AI pioneer.

In a recent blog post, Microsoft highlighted its continued advantageous position in its collaboration with OpenAI. Notably, the company retains the “right of first refusal” whenever OpenAI seeks additional cloud capacity. This ensures Microsoft has the opportunity to meet OpenAI’s growing demands before other providers are approached.

This shift in the partnership comes amid the announcement of the Stargate Project, a groundbreaking initiative led by former U.S. President Donald Trump. The project is a joint effort involving OpenAI, Oracle, Microsoft, SoftBank, and others, aiming to invest up to $500 billion over the next four years into U.S.-based AI infrastructure. Oracle has been identified as a pivotal technology partner alongside Microsoft, Arm, and Nvidia, tasked with establishing state-of-the-art data center facilities.

Oracle’s chairman, Larry Ellison, detailed the ambitious scope of the project during a White House press conference. “We’re building massive data centers, starting in Texas, with 10 structures already under construction, each spanning half a million square feet. Eventually, this will expand to 20 facilities across additional locations,” Ellison stated.

Oracle’s stock surged 7% following these announcements, reflecting optimism around its increased involvement in AI infrastructure.

Microsoft first invested $1 billion in OpenAI in 2019, moving OpenAI’s operations onto its Azure cloud platform. However, as OpenAI’s needs outpaced Azure’s capacity, third-party cloud providers like CoreWeave entered the picture to supplement Azure’s capabilities. Oracle joined this growing mix in 2023, further diversifying OpenAI’s infrastructure options.

OpenAI reaffirmed its ongoing reliance on Azure, with a recent “large-scale commitment” to the platform for training models and delivering its cutting-edge products. Microsoft maintains its exclusive rights to OpenAI’s API computing requests and continues to integrate OpenAI’s intellectual property into its products, including Copilot.

However, recent developments hint at tension within the partnership. In July, Microsoft publicly identified OpenAI as a competitor, signaling a more complex dynamic. On a December podcast with investors Brad Gerstner and Bill Gurley, Microsoft CEO Satya Nadella reflected on OpenAI CEO Sam Altman’s ambitious vision, noting, “What he wants to do, I have to accommodate for, so that he can do what he does. And he needs to accommodate for the discipline we need on our end, given the overall constraints we may have.”

As OpenAI broadens its cloud partnerships, Microsoft’s pivotal role may face increasing competition. However, the company remains deeply embedded in OpenAI’s ecosystem, ensuring the collaboration continues to shape the future of AI development.