Microsoft has been OpenAI's biggest backer, biggest cloud partner, and biggest gatekeeper for almost seven years. As of Monday, it is only one of those three.
OpenAI and Microsoft announced a new partnership deal Monday morning, with three changes that matter for investors.
First, OpenAI's revenue share to Microsoft is now subject to a total cap. The rate stays at 20%, and payments still run through 2030, but there is now a ceiling on how much money flows from OpenAI to its biggest backer.
Second, Microsoft's license to OpenAI's tech is no longer exclusive. The license runs through 2032, but Microsoft has to share the road.
Third, OpenAI can now sell its products across any cloud, including Amazon's AWS and Google Cloud. Azure is still the main cloud and still gets first dibs on new OpenAI launches, but the lock-in is gone.
The deal also drops a clause that required Microsoft to decide its response if OpenAI ever hit AGI - artificial general intelligence, or AI that rivals human skill.
Microsoft has poured more than $13 billion into OpenAI since 2019, and in return it had what looked like the best seat at the AI table.
Exclusive cloud, exclusive tech, and a cut of OpenAI's revenue. Each of those three pillars just got smaller.
The strain has been showing for months. OpenAI struck a major deal with Amazon in February, with AWS putting in up to $50 billion and OpenAI committing to a $100 billion expansion of its existing AWS contract over eight years.
AWS is also now the exclusive third-party cloud provider for Frontier - OpenAI's enterprise tool launched in February.
OpenAI revenue chief Denise Dresser said in a memo this month that the old deal "limited our ability to meet enterprises where they are." That is the polite version of saying Microsoft was getting in the way.
Microsoft shares fell about 1% Monday, suggesting the market views the changes as a softer Microsoft hand on OpenAI rather than a breakup.
The Redmond giant still has a license through 2032, and OpenAI still owes it $250 billion in committed Azure spending from a recap deal struck last October.
That recap valued Microsoft's for-profit stake at roughly $135 billion, or about 27% of OpenAI on an as-converted diluted basis.
Other AI players are racing to lock down compute. Meta recently committed $48 billion to cloud providers CoreWeave and Nebius to feed its own AI buildout, signaling the broader scramble for AI horsepower.
The era of OpenAI being a Microsoft product is over. From here, OpenAI is its own company, with Microsoft as the biggest customer instead of the only path forward.
The next question is how hard Amazon and Google push for the OpenAI customers Microsoft just lost the lock on.
Investors will also watch how the AGI clause removal plays out, since it removes one of the biggest open questions hanging over the deal: what happens to the partnership the day OpenAI says it has built true human-level AI.
