OpenAI and Microsoft’s partnership faces an uncertain future

Silicon Valley hasn’t seen this much tension between members of the same household since Erlich and Jian-Yang were living in the incubator.

OpenAI is currently negotiating with Microsoft—a top shareholder and strategic partner—to secure approval for its conversion into a for-profit company, and to loosen Microsoft’s grip on OpenAI’s products. But those talks aren’t going so well, according to a new Wall Street Journal report, which claims OpenAI is thinking about taking the “nuclear option” and approaching federal regulators with an antitrust complaint against Microsoft.

How we got here

The companies are at a standoff over two main issues:

1. Microsoft, which owns an AI coding chatbot competitor (Github Copilot), has access to all of OpenAI’s IP under their current agreement—but OpenAI doesn’t want that access to cover Windsurf, an AI-coding startup it recently acquired for $3 billion.
2. Microsoft is also reportedly asking for a larger stake in the new for-profit company than OpenAI is willing to give.

AI battle lines are being drawn: Startup ScaleAI has seen major customers sever some or all ties following its recent investment deal with Meta, including Google, Microsoft, OpenAI, and xAI—while Anthropic's co-founder said his company cut Windsurf’s direct access to its AI models after hearing rumors and reports of its acquisition by OpenAI.