Microsoft (MSFT) is reportedly weighing its options for possible legal action against Amazon (AMZN) for the latter’s latest deal with OpenAI. Microsoft and the dominant AI startup have been tied in a deal for years, albeit not an exclusive one. However, Amazon’s $50 billion deal with OpenAI could reportedly breach Microsoft’s exclusive cloud partnership with the ChatGPT maker.
Under terms still being negotiated, Amazon would invest $15 billion upfront, with an additional $35 billion contingent on OpenAI hitting an AGI milestone or pursuing an IPO, according to the report. However, Microsoft disputes that this directly breaches its deal with the AI powerhouse behind ChatGPT. Notably, Microsoft had been OpenAI’s exclusive cloud provider since investing $1 billion in the start-up in 2019, but gave up that right when it signed off on its restructuring in October.
The dispute centres on whether Amazon Web Services can offer OpenAI’s new commercial product, known as Frontier, without violating a longstanding agreement that requires all access to the start-up’s models to be routed through Microsoft’s Azure cloud platform. Amazon and OpenAI say they are building a system that works around the contract. However, Microsoft executives dispute this, saying the approach is not feasible and would violate the spirit, if not the letter, of their agreement, according to people familiar with the discussions.
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“We know our contract,” said a person familiar with Microsoft’s position. “We will sue them if they breach it. If Amazon and OpenAI want to take a bet on the creativity of their contractual lawyers, I would back us, not them.” Meanwhile, OpenAI believes its plans with Amazon are compatible with its deal with Microsoft, according to a person familiar with its positions. Investing up to $50 billion could make Amazon the biggest contributor to the AI company’s ongoing fundraising round, directly challenging Microsoft and making the stock battle between MSFT and AMZN much tighter.
