Microsoft now identifies OpenAI as a rival in AI and search

Microsoft has a complex history with OpenAI, having invested around $13 billion in the ChatGPT developer as part of a long-term partnership. Under this arrangement, Microsoft incorporates OpenAI’s models into its enterprise and consumer products and serves as OpenAI’s exclusive cloud provider.

Yet, in a recent SEC filing, Microsoft has labeled OpenAI as a “competitor” for the first time. In its annual 10-K report, OpenAI joins other AI competitors such as Anthropic, Amazon, and Meta. OpenAI is also listed alongside Google as a rival in search, due to its new SearchGPT feature announced last week.

Microsoft may be shifting its stance on OpenAI amid antitrust scrutiny—the FTC is currently investigating their relationship and similar investments by cloud providers in AI startups. Recently, Microsoft agreed to relinquish its board observer seat at OpenAI, a position it acquired after a controversy last fall involving OpenAI’s board and CEO Sam Altman, which led Microsoft CEO Satya Nadella to offer roles to Altman and other top executives.

SEC filings often include cautious warnings for investors. In Silicon Valley, partners and competitors can coexist, as demonstrated by Yahoo and Google’s relationship in the early 2000s. Their partnership eventually turned into competition as Google became the dominant player in search. Similarly, Microsoft and OpenAI’s relationship might evolve into a dynamic where both collaboration and competition coexist.

Despite this, Microsoft is diversifying its AI strategy.

In March, Microsoft brought on board Mustafa Suleyman and Karén Simonyan, the co-founders of the billion-dollar AI startup Inflection AI, to head its new Microsoft AI division. The tech giant is heavily investing in Microsoft Copilot and developing an AI future that is distinct from its relationship with OpenAI.