Microsoft abandons observer position on OpenAI board of directors

Microsoft abandons observer position on OpenAI board of directors

Microsoft is saying goodbye to its observer status on OpenAI’s board of directors. The tech giant made that known in a memo to the AI company’s top executives. Following Microsoft’s departure, Apple also relinquishes its intended role as an observer in OpenAI’s boardroom.

The official reason for abandoning the observer role is that the company now has sufficient confidence in the new board and its direction. Behind the scenes, however, Microsoft’s dominant market position in the AI field is under the magnifying glass of authorities in both the EU and the US. Bloomberg learned about the Microsoft memo through an anonymous source.

The European Commission will question Microsoft about the company’s possible exclusivity agreements for using OpenAI’s AI services. Despite a previously formal antitrust investigation being off the table, this could potentially be the prelude to a new investigation.

Microsoft uses OpenAI’s models for its own Bing and Copilot services. OpenAI, in turn, uses Microsoft’s cloud infrastructure to train AI models. The company has already invested some 13 billion dollars (about 12 billion euros) in OpenAI. For those keeping track, this amount seems to grow larger with every news article about OpenAI.

AI company scooped up

Lawmakers in the US are also suspicious of the dominant position Microsoft is acquiring for itself in AI, a field in which expectations are already high and investments seemingly endless. The Federal Trade Commission (FTC), the U.S. antitrust agency, is reviewing whether Microsoft has adequately informed antitrust authorities about its emptying of Inflection AI.

The company appointed Mustafa Suleyman, co-founder of Inflection AI, to head a newly created AI division at Microsoft. At the same time, Microsoft took over pretty much the entire management and staff of Inflection AI, paying the remaining empty shell 620 million dollars to license its software and LLMs. The company also had 30 million dollars to spare to deal with all legal consequences of the unofficial takeover.

Mediating role during crisis

A crisis broke out at OpenAI late last year when board members demanded the departure of co-founder Sam Altman. Staff members, however, dug in their heels; employees even quit and demanded Altman’s return.

He did indeed return, peace returned as well, and Microsoft proved to be a mediating factor throughout the process. Altman rewarded the company with observer status on the board of directors, meaning it had access to information but no voting rights.

Also read: Microsoft’s billion-dollar investment in OpenAI on EU’s radar