Keep your friends close, but your enemies closer. Traditionally, we’ve misattributed this phrase to the Chinese military general Sun Tzu. Yet, it was author and screenwriter Mario Puzo and director Francis Ford Coppola who used it in The Godfather II in 1974. And since then—and probably long before—it has become a common phrase in the business world.
Microsoft, for example, has proven the saying true by investing $10 billion in OpenAI in 2023. To date, Microsoft's total investment now is $13 billion.
The relationship seemed fantastic then, and Microsoft CEO Satya Nadella played a significant role in the scandal surrounding OpenAI CEO Sam Altman in November 2023. Nadella supported Altman and even offered him a job, making it seem like they had strengthened their alliance.
Today, however, this friendship isn’t so clear cut. A few days ago, OpenAI launched SearchGPT, its search engine, a direct competitor to Google and Microsoft’s search engine, Bing.
Microsoft apparently didn’t like the release of this new product, and its relationship with OpenAI, as reported by CNBC, has become more complicated. In its annual report, Microsoft added OpenAI to a list of competitors, which includes Amazon, Apple, Google, and Meta. It did so in two areas: AI development and search engine:
“Our AI offerings compete with AI products from hyperscalers such as Amazon and Google, as well as products from other emerging competitors, including Anthropic, OpenAI, Meta, and other open source offerings, many of which are also current or potential partners.”
“Our Search and news advertising business competes with Google, OpenAI, and a wide array of websites, social platforms like Meta, and portals that provide content and online offerings to end users.”
An OpenAI spokesperson told CNBC that the relationship between the two companies hadn’t changed and that Microsoft and OpenAI made this alliance with the understanding that they would end up competing one day. Still, things are starting to get messy.
This isn’t just because of OpenAI’s launch of SearchGPT or the competition between ChatGPT and Copilot+, but also because of recent changes at Microsoft, which hired Mustafa Suleyman, co-founder of DeepMind and Inflection AI, to lead its AI division.
The two companies certainly have a partnership full of fine red lines. Microsoft currently relies on OpenAI’s GPT-4 LLM for all its AI systems. Still, it’s also working on its own large language models.
Microsoft is working on “small” models for PCs, laptops, and cell phones, like Phi-3, as well as large models to compete with GPT-4. In addition, we recently learned of the existence of MAI-1, which will theoretically compete with GPT-4, Gemini, and Claude 3.5.
Meanwhile, OpenAI included an unfortunate detail when announcing GPT-4o. The most recent version of the LLM surprised users with its ability to speak naturally, but curiously, it used Apple’s iPhone and Mac devices in the demos. Of Windows, its great ally, it included nothing. The subsequent presentation of Apple Intelligence showed that OpenAI was playing both sides.
So, Microsoft’s investment in OpenAI seems to be a matter of necessity: Microsoft needed OpenAI, and OpenAI needed Microsoft. And what they’re both trying to do is just that.
Stop needing each other.
This article was written by Javier Pastor and originally published in Spanish on Xataka.
Image | Microsoft | Apple
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