OpenAI board will not have Microsoft and Apple as observers

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Microsoft has given up its seat as an observer on the board of OpenAI while Apple will not take up a similar position, amid growing scrutiny by global regulators of Big Tech’s investments in AI start-ups.

Microsoft, which has invested $13bn in the maker of the generative AI chatbot ChatGPT, said in a letter to OpenAI that its withdrawal from its board role would be “effective immediately”.

Apple had also been expected to take an observer role on OpenAI’s board as part of a deal to integrate ChatGPT into the iPhone maker’s devices, but would not do so, according to a person with direct knowledge of the matter. Apple declined to comment.

OpenAI would instead host regular meetings with partners such as Microsoft and Apple and investors Thrive Capital and Khosla Ventures — part of “a new approach to informing and engaging key strategic partners” under Sarah Friar, the former Nextdoor boss who was hired as its first chief financial officer last month, an OpenAI spokesperson said.

The move also comes as antitrust authorities in the EU and US examine the partnership between Microsoft and OpenAI as part of broader concerns about competition in the rapidly growing sector.

Microsoft accepted a non-voting role on the board following the chaos that engulfed OpenAI last year when its chief executive Sam Altman was abruptly fired by the board, before being reinstated just days later. The attempted boardroom coup threatened OpenAI’s valuation, and with it Microsoft’s multibillion-dollar investment into the company.  

“This position provided insights into the board’s activities without compromising its independence,” Microsoft’s deputy general counsel Keith Dolliver wrote in a letter to OpenAI late on Tuesday. Since then “we have witnessed significant progress from the newly formed board and are confident in the company’s direction.” Therefore, Microsoft’s role on the board was no longer “necessary”, he said. 

OpenAI remains one of Microsoft’s “most valued partners”, Dolliver wrote.

The Microsoft partnership has been critical to OpenAI’s success. The start-up has relied on Microsoft for computing power and cloud storage worth billions of dollars. Microsoft chief executive Satya Nadella was a key power broker during the boardroom upheaval at OpenAI in November.

Investing in OpenAI has also propelled Microsoft to an early lead in the generative AI race. The company said in April that it was struggling to keep up with demand for its AI services, which have helped drive sales at its Azure cloud computing platform at an accelerated rate over the past three quarters.

Microsoft does not have a conventional equity stake in the start-up. Instead, it has an entitlement to a share of the profits from a subsidiary of OpenAI, up to a certain limit. 

According to OpenAI’s website it “remains an entirely independent company governed by the OpenAI Nonprofit”.

Microsoft and OpenAI have played down their ties as antitrust concerns have grown. The European Commission said in June it was exploring the possibility of an antitrust investigation into the tie-up after it said it would not proceed with a probe under merger control rules. The Federal Trade Commission in the US has also begun scrutinising investments made by Big Tech companies including Microsoft, Amazon and Google into generative AI start-ups.

An OpenAI spokesperson said: “We’re grateful to Microsoft for voicing confidence in the board and the direction of the company, and we look forward to continuing our successful partnership.”

OpenAI’s eight-person board includes Altman as well as Larry Summers, the former US Treasury secretary, and Fidji Simo, chief executive of grocery delivery company Instacart. It is chaired by Bret Taylor, former co-CEO of Salesforce and co-founder of AI start-up Sierra.

Additional reporting by Michael Acton in San Francisco

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