Microsoft Relinquishes Exclusive Cloud Provider Role for OpenAI

Microsoft, OpenAI's largest investor, loses its exclusive cloud provider status while retaining a strong partnership. Discover key updates on the Stargate Project, Oracle’s involvement, and the evolving dynamics between Microsoft and OpenAI in the AI infrastructure space.

Jan 22, 2025 - 05:40
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Microsoft Relinquishes Exclusive Cloud Provider Role for OpenAI
From left, President Donald Trump, Oracle Executive Chairman Larry Ellison, SoftBank CEO Masayoshi Son and OpenAI CEO Sam Altman appear in the Roosevelt Room of the White House in Washington on Jan. 21, 2025. Trump announced a joint venture to fund artificial intelligence infrastructure.

Microsoft, OpenAI's largest investor and primary cloud partner, is relinquishing its exclusivity as the sole provider of computing capacity for the AI startup. In a blog post on Tuesday, Microsoft emphasized that it remains in a strong position with OpenAI. Moving forward, when OpenAI requires additional capacity, Microsoft will hold the right of first refusal before OpenAI approaches other providers.

This shift was highlighted during President Donald Trump’s announcement of the Stargate Project, a collaborative initiative with OpenAI, Oracle, and SoftBank to invest billions in U.S. AI infrastructure. Executives from these companies committed to an initial $100 billion investment, with plans to expand up to $500 billion over the next four years through a newly established entity.

Oracle was identified as a key initial technology partner, alongside Arm, Microsoft, and Nvidia, for developing data center infrastructure. According to Oracle Chairman Larry Ellison, the first data centers—each spanning 500,000 square feet—are already under construction in Texas, with plans to expand from 10 buildings to 20 and additional locations beyond the inaugural Abilene site.

Oracle shares surged 7% on Tuesday. In 2019, three years before the launch of ChatGPT, Microsoft invested $1 billion in OpenAI, with the AI startup committing to migrate its services to Azure. As OpenAI’s computing demands grew, Microsoft supplemented its Azure cloud infrastructure by partnering with third-party providers, such as CoreWeave.

Oracle joined the equation last year. The database software company, which lags behind Amazon, Microsoft, and Google in the cloud market, announced in June that Microsoft’s Azure AI platform would be integrated with Oracle’s cloud.

On Tuesday, OpenAI confirmed plans to continue increasing its use of Azure, while Microsoft revealed that OpenAI had recently made a new, large Azure commitment for product development and model training. Despite some signs of strain in their partnership—such as Microsoft designating OpenAI as a competitor in July—Microsoft retains exclusive rights to supply computing requests for OpenAI’s application programming interface and access to OpenAI’s intellectual property for integration into products like Copilot.

Discussing the dynamic between the two companies, Microsoft CEO Satya Nadella acknowledged OpenAI CEO Sam Altman’s ambitious goals during a December podcast with investors Brad Gerstner and Bill Gurley. What he wants to do, I have to accommodate for, so that he can do what he does, Nadella said. And he needs to accommodate for the discipline that we need on our end, given the overall constraints that we may have.

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