Microsoft was worried OpenAI would run off to Amazon and ‘shit-talk’ Azure

When OpenAI was busy experimenting with AI-powered gaming bots, Microsoft CEO Satya Nadella and OpenAI CEO Sam Altman were in the early days of forming an AI partnership. Court documents from the ongoing Musk v. Altman trial have provided a rare look at the communications between Microsoft’s top executives about investing in OpenAI and fears the AI startup could “storm off to Amazon” and “shit-talk” Microsoft.

Just days after OpenAI showed a bot beating a Dota 2 professional in the summer of 2017, Altman responded to Nadella’s congratulations email with a proposal for a much bigger partnership with OpenAI to fund its next phase of AI research. OpenAI needed large sums of compute to expand the Dota 2 project, far beyond the Azure credits it was using from Microsoft at the time. “Probably something like $300 million at Azure list prices” according to Altman. This initially spooked some executives inside Microsoft.

“For those numbers to make sense we’d have to be generating significant incremental revenue directly due to the deal ($500 million+) that couldn’t be gained in a more efficient way,” said Jason Zander, who was Microsoft’s Azure chief at the time, in an August 2017 email to Nadella.

Altman came back with an alternative proposal several months later to “create a partnership with Xbox around gaming, and an open offer to share their technology and IP in exchange for expanded sponsorship for their Dota research,” according to Brett Tanzer, now VP of Azure solutions and ecosystem. The Xbox team was interested in “exploring collaboration opportunities,” but couldn’t commit to the research costs by itself.

Microsoft CTO Kevin Scott then weighed in on the debate over whether to give OpenAI more Azure credits for its research in an email to Nadella in January 2018. He wasn’t sure what Microsoft was “going to get out of [the deal]” and wasn’t sure how the Dota efforts would benefit the company, but he was definitely concerned about OpenAI moving over to Microsoft’s biggest cloud rival.

“I guess the other thing to think about here is the PR downside of us not funding them, and having them storm off to Amazon in a huff and shit-talk us and Azure on the way out,” said Scott in his January 2018 email. “They are building credibility in the AI community very fast, recruiting well, and are going to be an influential voice. All things equal, I’d love to have them be a Microsoft and Azure net promoter. Not sure that alone is worth what they’re asking.”

A year later, Scott admitted in an email to Nadella and Microsoft cofounder Bill Gates that he had been “highly dismissive” of AI efforts at OpenAI and Google DeepMind when the companies were competing to see who “could achieve the most impressive game-playing stunt.” Scott became a lot more impressed when OpenAI moved toward natural language processing models and feared Microsoft would slip behind Google’s AI efforts. A month after Scott’s “thoughts on OpenAI” email, Microsoft announced a $1 billion investment in OpenAI.

Nearly seven years on, the close partnership-turned-situationship has led to OpenAI renegotiating its deal with Microsoft to bring its AI models, Codex, and other tools to AWS. The latest change to the deal was announced just days after the kind of OpenAI “shit-talk” that Scott was worried about. OpenAI told its employees last month that its deal with Microsoft had “also limited our ability to meet enterprises where they are — for many that’s [Amazon] Bedrock.”