Musk v. Altman Evidence Shows What Microsoft Executives Thought of OpenAI

OpenAI’s relationship with Microsoft, its longtime investor and cloud partner, has grown increasingly complicated over the years as the ChatGPT-maker has grown into a behemoth competitor.

But Microsoft executives had reservations about sending additional funding to OpenAI as far back as 2018 when it was just a small nonprofit research lab, according to emails between more than a dozen Microsoft executives, including CEO Satya Nadella, shown in a federal court on Thursday during the Musk v. Altman trial.

The emails show how Microsoft, at the time, wavered over what has since been held up as one of the most successful corporate partnerships in tech history. Several Microsoft executives said in the emails their visits to OpenAI did not indicate any imminent breakthroughs in developing artificial general intelligence. In 2017, much of OpenAI’s work was focused on building AI systems that could play video games, which showed early signs of success. But OpenAI needed five times more computing power than it had originally secured from Microsoft to continue the project.

Microsoft worried that not providing support could push OpenAI into the arms of Amazon, the world’s dominant cloud computing provider at the time. Roughly 18 months after the emails were sent, Microsoft announced a landmark $1 billion investment in OpenAI after the lab created a for-profit arm that provided the tech giant with the potential to generate a return of $20 billion.

Microsoft declined to comment.

Elon Musk’s attorneys introduced the emails to show Microsoft’s evolving relationship with OpenAI. After Musk reached out to Nadella, Microsoft in 2016 agreed to provide $60 million worth of cloud computing services to OpenAI at a steep discount. OpenAI consumed the services twice as fast as expected.

The email chain kicked off on August 11, 2017, with Nadella reaching out to OpenAI CEO Sam Altman to congratulate the lab on winning a video game competition using AI to mimic a human player. Ten days later, Altman responded seeking $300 million worth of Microsoft Azure cloud computing services.

“We could figure how to fund some of it but not that much,” Altman wrote, apparently seeking a financial handout and engineering help. “I think it will be the most impressive thing yet in the history of AI.”

Nadella asked four lieutenants for their input on how to respond three days later. Microsoft’s AI team saw “no value in engaging,” according to a response from Jason Zander, Microsoft’s executive vice president, that also documented how other teams felt. Its research team thought its own work was “more advanced,” while the public relation teams didn’t like the idea of supporting a group pushing the idea of “machines beating humans.” Ultimately, Zander suggested that Azure would benefit from associating with Musk and Altman but that he wouldn’t want to “take a complete bath,” or large financial hit, in doing so.

A subsequent analysis showed that Microsoft stood to lose about $150 million over several years if it provided the services Altman wanted, according to one email. “Unless he can help us draw a more direct networking effect with OpenAI -> Microsoft business value, we will wind up having to pass,” Zander wrote.

The thread went dark for several months, but was revived on January 10, 2018, with an email to Nadella from Brett Tanzer—who signed off his emails with “Brettt”—then a director on the Azure cloud unit. Altman had told Tanzer that OpenAI could license its gaming AI to Microsoft’s Xbox video game division in exchange for “$35-50 million in Azure Credits.” But Xbox couldn’t commit that much money. Microsoft planned to tell Altman there would be no more discounts after that March, per Tanzer’s email.