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Microsoft has given up its seat as an observer on OpenAI’s board, while Apple will not take a similar position, amid growing scrutiny from global regulators of Big Tech’s investments in AI start-ups.
Microsoft, which has invested $13 billion in AI-generating chatbot maker ChatGPT, said in a letter to OpenAI that its withdrawal from its board role would be “effective immediately.”
Apple was also expected to take an observer role on OpenAI’s board as part of a deal to integrate ChatGPT into the iPhone maker’s devices, but would not, according to a person with direct knowledge of the matter. Apple declined to comment.
OpenAI would instead hold regular meetings with partners such as Microsoft and Apple and investors Thrive Capital and Khosla Ventures – part of “a new approach to informing and engaging key strategic partners” under Sarah Friar, the former boss of Nextdoor who was hired as its first chief financial officer last month, an OpenAI spokesperson said.
The move also comes as antitrust authorities in the EU and US scrutinize the partnership between Microsoft and OpenAI as part of wider concerns about competition in the fast-growing sector.
Microsoft accepted a non-voting role on the board following the chaos that engulfed OpenAI last year when its chief executive Sam Altman was abruptly fired from the board, before being reinstated just days later. The boardroom coup attempt threatened OpenAI’s valuation and with it Microsoft’s multibillion-dollar investment in the company.
“This position provided insight into the board’s activities without compromising its independence,” Microsoft deputy general counsel Keith Dolliver wrote in a letter to OpenAI late Tuesday. Since then “we have seen significant progress from the newly formed board and are confident in the direction of the company.” Therefore, Microsoft’s role on the board was no longer “necessary,” he said.
OpenAI remains one of Microsoft’s “most valued partners,” Dolliver wrote.
Microsoft’s partnership has been critical to OpenAI’s success. The startup has 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 OpenAI boardroom turmoil in November.
The investment in OpenAI has also pushed Microsoft into an early lead in the generative AI race. The company said in April that it was struggling to keep up with demand for its AI services, which have helped boost sales of its Azure cloud computing platform at an accelerated pace over the past three quarters.
Microsoft does not have a conventional equity stake in the start-up. Instead, it has a right to a share of the profits from an OpenAI affiliate, up to a certain limit.
According to OpenAI’s website it “remains an entirely independent company governed by the OpenAI NGO”.
Microsoft and OpenAI have downplayed their ties as antitrust concerns have grown. The European Commission said in June it was considering an antitrust investigation into the merger after it said it would not proceed with an investigation under merger control rules. The US Federal Trade Commission has also begun scrutinizing investments made by Big Tech companies, including Microsoft, Amazon and Google, in AI-generating start-ups.
An OpenAI spokesperson said: “We are grateful to Microsoft for their confidence in the company’s board and leadership, and we look forward to continuing our successful partnership.”
OpenAI’s eight-person board includes Altman as well as Larry Summers, former US Treasury secretary, and Fidji Simo, chief executive of grocery delivery company Instacart. It is led by Bret Taylor, former co-CEO of Salesforce and co-founder of AI start-up Sierra.
Additional reporting by Michael Acton in San Francisco