Microsoft and OpenAI Clash Over AGI Clause in Partnership Agreement

OpenAI's Unreleased AGI Paper Could Complicate Microsoft Negotiations

A small clause inside OpenAI's contract with Microsoft, once considered a distant hypothetical, has now become a flashpoint in one of the biggest partnerships in tech. The clause states that if OpenAI's board ever declares it has developed artificial general intelligence (AGI), it would limit Microsoft's contracted access to the startup's future technologies. Microsoft, which has invested more than $13 billion in OpenAI, is now reportedly pushing for the removal of the clause and is considering walking away from the deal entirely, according to the Financial Times. Late last year, tensions around AGI's suddenly pivotal role in the Microsoft deal spilled into a debate within OpenAI over an internal research paper, according to multiple sources familiar with the matter. Titled "Five Levels of General AI Capabilities," the paper outlines a framework for classifying progressive stages of AI technology. By making specific assertions about future AI capabilities, sources claim, the paper could have complicated OpenAI's ability to declare that it had achieved AGI, a potential point of leverage in negotiations. "We're focused on developing empirical methods to evaluate AGI progress -- work that is reproducible, measurable, and useful to the broader field," OpenAI spokesperson Lindsay McCallum said in a written comment to WIRED. "The 'Five Levels' was an early attempt at classifying stages and terminology to describe general AI capabilities. This was not a scientific research paper." Microsoft declined to comment. In a blog post describing its corporate structure, OpenAI notes that AGI "is excluded from IP licenses and other commercial terms with Microsoft." OpenAI defines AGI as "a highly autonomous system that outperforms humans at most economically valuable work." The two companies have been renegotiating their agreement as OpenAI prepares a corporate restructuring. While Microsoft wants continued access to OpenAI's models even if the startup declares AGI before the partnership ends in 2030, one person familiar with the partnership discussions tells WIRED that Microsoft doesn't believe OpenAI will reach AGI by that deadline. But another source close to the matter describes the clause as OpenAI's ultimate leverage. Both sources have been granted anonymity to speak freely about private discussions. According to the Wall Street Journal, OpenAI has even considered whether to invoke the clause based on an AI coding agent. The talks have grown so fraught that OpenAI has reportedly discussed if it should publicly accuse Microsoft of anticompetitive behavior, per the Journal. A source familiar with the discussions, granted anonymity to speak freely about the negotiations, says OpenAI is fairly close to achieving AGI; Altman has said he expects to see it during Donald Trump's current term. That same source suggests there are two relevant definitions: First, OpenAI's board can unilaterally decide the company has reached AGI as defined in its charter, which would immediately cut Microsoft off from accessing the technology or revenue derived from AGI; Microsoft would still have rights to everything before that milestone. Second, the contract includes a concept of sufficient AGI, added in 2023, which defines AGI as a system capable of generating a certain level of profit. If OpenAI asserts it has reached that benchmark, Microsoft must approve the determination. The contract also bars Microsoft from pursuing AGI on its own or through third parties using OpenAI's IP.

Microsoft and OpenAI dueling over artificial general intelligence, The Information reports

June 25 (Reuters) - Microsoft (MSFT.O), opens new tab and OpenAI are at odds over a contractual provision related to artificial general intelligence, The Information reported on Wednesday. Under the current terms, when OpenAI achieves AGI, Microsoft's access to such a technology would be void. Microsoft wants OpenAI to remove that clause but so far OpenAI has refused, the report said. The report comes at a time when one of the most pivotal partnerships in the field of AI is under strain. OpenAI needs Microsoft's approval to complete its transition into a public-benefit corporation. But the two have not been able to agree on details even after months of negotiations, according to sources. Microsoft partnered with OpenAI in 2019, investing $1 billion to support the startup's development of AI technologies on its Azure cloud platform. The companies did not immediately respond to Reuters requests for comment. In multiple statements addressing recent media speculation, both have said that discussions are ongoing and they remain optimistic about a long-term partnership. Reporting by Niket Nishant in Bengaluru; Editing by Alan Barona Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Artificial Intelligence

"Nonsensical Benchmark Hacking": Microsoft No Longer Believes OpenAI Is Capable of Achieving AGI

The love's gone bad between Microsoft and OpenAI, whose lucrative partnership ushered in our age of AI hype. OpenAI is trying to convert into a for-profit company, but it's so far failed to secure its benefactor's approval and negotiate a new contract. The frustration is running so high that the ChatGPT maker is reportedly considering bring an antitrust suit against Microsoft if it doesn't get its way. As the Wall Street Journal reports, one thing driving a wedge between them is the industry's favorite buzzword: artificial general intelligence, or AGI. Definitions vary -- part of the reason for the split -- but typically, AGI is imagined as an AI model that reaches or exceeds humanlike intelligence. OpenAI specifically defines it as "highly autonomous systems that outperform humans at most economically valuable work," per the WSJ. The issue is that Microsoft CEO Satya Nadella is apparently pretty skeptical that OpenAI -- or anyone, for that matter -- can achieve this revered milestone, which is a startling vote of no confidence not just from a tech luminary, but from the head of a company that's bought deep into the hype. OpenAI CEO Sam Altman, on the other hand, is an AGI evangelist. In fact, according to WSJ sources, Altman believes that OpenAI is on the verge of being able to declare its AI products have reached AGI levels of proficiency. It's not a purely academic disagreement. The two parties' current contract contains a major clause that states that when OpenAI achieves AGI, the existing partnership ends, the upshot being that Microsoft loses access to OpenAI's future products. That's a dealbreaker for Microsoft: it won't give OpenAI its say-so unless the new contract guarantees exclusive access to OpenAI's technology even after AGI is reached. But again, what really is AGI? How would you define "humanlike" intelligence, and how would you measure it? No one can agree on these finer points, and yet the whole industry reveres this extremely nebulous concept as its end goal and raison dêtre. That pie-in-the-sky thinking can string along wide-eyed investors for a while, but it makes for a pretty fraught contract clause. "Us self-claiming some AGI milestone, that's just nonsensical benchmark hacking," Nadella said on a popular tech podcast in February, as quoted by the WSJ. According to the paper, Nadella's remarks stunned some OpenAI officials, as Nadella was once described by Altman as an "AGI believer." It seems that Microsoft is worried that OpenAI could declare AGI in bad faith. If it does, Microsoft could sue, but that could result in a lengthy legal battle. Preferably, it'd rather just not have the AGI clause at all. Some of its executives never wanted to agree to the clause in the current contract in the first place, according to WSJ sources, believing it was "arbitrary and unenforceable." But Microsoft was so far behind on AI when the contract was negotiated in 2019 that it agreed anyway. The current generation of AI models don't evince a technology that's on the verge of exceeding human intelligence. But OpenAI executives have reportedly discussed the possibility of declaring AGI by releasing an AI coding agent that exceeds the capabilities of an advanced human programmer, per WSJ sources. Should it choose to do so, Open AI could also declare it's achieved "sufficient AGI," meaning that its AI models are capable of generating the maximum profits that Microsoft's investors are entitled to -- a sum equal to, at the time this clause was added when the contract was renegotiated in 2023, roughly $92 billion in future profits, the Information reported. Achieving this would terminate Microsoft's exclusive rights to use OpenAI's tech and allow OpenAI to sell its products through other cloud firms, something it's currently restricted from doing. Notably, OpenAI's model doesn't need to actually generate those profits; it merely needs to be deemed capable of doing so. There are other major points of contention beyond AGI. In general, Microsoft will want what it feels like it's owed: it's invested over $13 billion in the startup and has provided it with the hardware to train and run its AI models. Currently, it already owns the rights to OpenAI's intellectual property, which it uses to help build its own AI offerings like Copilot. But among other things, OpenAI doesn't want Microsoft gaining the rights to a coding startup it (meaning OpenAI) just purchased called Windsurf, which competes with Microsoft's products, according to previous WSJ reporting. (Another point of contention: Microsoft is having trouble selling Copilot to clients, whose workers overwhelmingly prefer ChatGPT.) As part of OpenAI's restructuring into a for-profit, public benefit corporation, Microsoft is also demanding a bigger stake in the company. It may accept 35 percent ownership after recent negotiations, the WSJ reported. And the Information previously reported that OpenAI wants Microsoft to give up its rights to all of OpenAI's future profits in exchange for a 33 percent stake in the new company. OpenAI has depended on Microsoft to provide its compute power and contractually, as mentioned earlier, can only sell its products through Microsoft's Azure cloud services. Lately, however, OpenAI has looked outside the partnership for hardware help, including securing a deal with software giant Oracle, which has agreed to buy $40 billion of Nvidia AI chips to power OpenAI's new US data center. OpenAI also negotiated an agreement with Google to gain access to its vast computing capacity, Reuters reported earlier this month. No doubt that Microsoft will want to keep its coveted access to OpenAI's tech in order to maintain its foothold in the AI race. What's more, the new WSJ reporting indicates that Microsoft is currently restricted from developing AGI on its own under the current contract, which lasts until 2030. But there's major pressure on OpenAI to reach a compromise, too. If it can't complete its restructuring into a for-profit -- itself a major blow -- it could lose out on a staggering $20 billion in funding. All the while, Microsoft could choose to simply walk away from the deal, OpenAI's legal threats be damned.

When AGI Becomes Real, Microsoft May Lose Its $13 Billion Bet | AIM

According to Media reports, Microsoft plans to continue utilising OpenAI's technology under its existing commercial agreement, which is set to expire in 2030. Tensions between OpenAI and Microsoft are rising, as multiple reports have suggested in recent weeks. According to a recent report from the Information, the Artificial General Intelligence (AGI) clause in OpenAI's agreement with Microsoft has become a source of friction, threatening what has so far been the most consequential partnership in AI. The clause states that if OpenAI achieves AGI, Microsoft would lose access to OpenAI's most advanced technologies. This provision was initially intended to prevent any single commercial entity from monopolising AGI and to keep control with OpenAI's nonprofit board. However, Microsoft views continued access as crucial for its own business, particularly as it strives to keep pace with its rivals, such as Google. According to a report by the Financial Times, Microsoft plans to continue utilising OpenAI's technology under its existing commercial agreement, which is set to expire in 2030. The definition of AGI is itself uncertain and vague. With leaked documents indicating it might be linked to an AI system generating $100 billion in profit, it remains a shifting target that could be influenced by either side. Meanwhile, OpenAI is seeking to restructure its for-profit arm, the unit behind ChatGPT, with the eventual goal of going public. But Microsoft, its largest external shareholder, has resisted approving the move unless OpenAI removes a provision that allows it to cut off Microsoft's access to its models upon achieving AGI. Microsoft has invested approximately $13 billion in OpenAI since 2019. However, OpenAI has since expanded its investor base. In October 2024, it closed a record-breaking $6.6 billion funding round from leading investors at a valuation of $157 billion. The round was led by Thrive Capital, which contributed $1.6 billion. It included participation from Microsoft, Nvidia, SoftBank, Khosla Ventures, Altimeter Capital, Fidelity, Tiger Global, and MGX, a fund backed by the United Arab Emirates. Most recently, SoftBank has agreed to invest up to $40 billion at a valuation of $300 billion in OpenAI, with $10 billion expected to be syndicated to co-investors. However, the funding is contingent on OpenAI completing this restructuring. If Microsoft does not approve the change by the agreed deadline (end of 2025), OpenAI risks losing billions in committed capital from these investors. That said, in all possibility, other investors may come to its rescue. At the same time, OpenAI has already started exploring other options. According to a recent report, the startup has begun running its models on Google Cloud. OpenAI's decision to start using Google's TPUs, rather than relying solely on NVIDIA chips through Microsoft and Oracle, marks an apparent effort to reduce costs and diversify its computing partners. According to the report, OpenAI is renting TPUs through Google Cloud to handle inference workloads, as its user base and corresponding compute needs continue to grow. This not only threatens Azure's AI revenue but also signals to the market that Microsoft's infrastructure may not be the default choice for leading AI workloads. At Google Cloud Next 2025, the company unveiled Ironwood, its seventh-generation Tensor Processing Unit (TPU), explicitly designed for inference. It's a key part of Google's broader AI Hypercomputer architecture. Ironwood will be available to Google Cloud customers later this year, the tech giant said. It currently supports advanced models, including Gemini 2.5 Pro and AlphaFold. In a recent podcast, OpenAI CEO Sam Altman addressed recent speculation about tensions between OpenAI and Microsoft. He acknowledged that, like in any deep partnership, there are occasional points of friction. However, he downplayed the idea of a serious rift, describing a recent call with Microsoft CEO Satya Nadella as "super nice" and focused on planning their long-term collaboration. However, it is no secret that OpenAI's business is hurting Microsoft. For instance, last year, Amgen announced it would roll out Microsoft's Copilot AI assistant to 20,000 employees, marking a high-profile validation of Microsoft's significant investment in generative AI. However, just over a year later, Amgen staff have primarily shifted to using OpenAI's ChatGPT. The company expanded its use of ChatGPT earlier this year, citing improvements in the tool and positive feedback from employees who found it helpful for research and summarising complex scientific content. "OpenAI has done a tremendous job making their product fun to use," said Sean Bruich, Amgen's senior vice president. While Copilot remains a valuable tool, he said, its primary strength lies in its integration with Microsoft applications, such as Outlook and Teams. OpenAI and Microsoft are also reportedly in a standoff over the terms of OpenAI's $3 billion acquisition of the coding startup Windsurf. Under their existing agreement, Microsoft has full access to OpenAI's intellectual property and offers GitHub Copilot, its own AI-powered coding assistant that rivals OpenAI's products. OpenAI, however, is pushing to keep Windsurf's IP out of Microsoft's reach. OpenAI's revenue for 2024 was approximately $3.7 billion, with significant growth projected for 2025, reaching around $11.6 billion. Meanwhile, Microsoft recently informed shareholders that it is generating over $13 billion in annualised AI revenue. Currently, OpenAI is obligated to share 20% of its revenue with Microsoft under an agreement that runs through 2030. This revenue-sharing arrangement is expected to decrease to 10% by the end of the decade, as OpenAI has informed investors of plans to reduce the share allocated to Microsoft and other commercial partners Microsoft is also playing it safe. To hedge its bets, it has begun testing models from OpenAI rivals, including Anthropic, xAI, DeepSeek, and Meta, as potential alternatives to its Copilot tools, which are embedded in products such as Windows and Edge. At the same time, the company is also internally building its in-house LLMs under the leadership of AI chief Mustafa Suleyman. While OpenAI turns to Google's TPUs, Microsoft is struggling to keep pace with its in-house AI chip development. Microsoft's upcoming Maia AI chip, internally code-named Braga, is reportedly facing a setback of at least six months, pushing its large-scale production timeline from 2025 to 2026, according to The Information, which cited three individuals familiar with the project. When Braga eventually enters production, it is expected to significantly lag behind NVIDAI's Blackwell chip in terms of performance. Blackwell began rolling out in late 2024 and has set a high bar for AI hardware. Initially, Microsoft intended to deploy Braga in its data centres this year. However, unexpected design changes, limited staffing, and high employee turnover have all contributed to the delay, the report added. Despite public optimism, the Microsoft-OpenAI partnership is at a pivotal moment. Altman's discussions with Nadella and even US President Donald Trump, who announced a $500 billion AI infrastructure initiative involving OpenAI, suggest efforts to stabilise the relationship. Notably, Microsoft was absent from the January White House event, where Altman, joined by SoftBank and Oracle, announced OpenAI's Stargate data centre initiative. OpenAI's strategic moves with Google and others indicate a push for independence, while Microsoft seeks to protect its investment and market position.

Microsoft, OpenAI Said to Be Dueling Over Artificial General Intelligence

The companies said they have a long-term, productive partnership Microsoft and OpenAI are at odds over a contractual provision related to artificial general intelligence, The Information reported on Wednesday. Under the current terms, when OpenAI achieves AGI, Microsoft's access to such a technology would be void. Microsoft wants OpenAI to remove that clause but so far OpenAI has refused, the report said. "We have a long-term, productive partnership that has delivered amazing AI tools for everyone. Talks are ongoing and we are optimistic we will continue to build together for years to come," OpenAI and Microsoft said in a joint statement emailed to Reuters. The report comes at a time when one of the most pivotal partnerships in the field of AI is under strain. OpenAI needs Microsoft's approval to complete its transition into a public-benefit corporation. But the two have not been able to agree on details even after months of negotiations, according to sources. Microsoft partnered with OpenAI in 2019, investing $1 billion (roughly Rs. 8,581 crore) to support the startup's development of AI technologies on its Azure cloud platform. © Thomson Reuters 2025

Microsoft and OpenAI dueling over artificial general intelligence: Report

Under the current terms, when OpenAI achieves AGI, Microsoft's access to such a technology would be void. Microsoft wants OpenAI to remove that clause but so far OpenAI has refused, the report said. Microsoft and OpenAI are at odds over a contractual provision related to artificial general intelligence, The Information reported on Wednesday. Under the current terms, when OpenAI achieves AGI, Microsoft's access to such a technology would be void. Microsoft wants OpenAI to remove that clause but so far OpenAI has refused, the report said. "We have a long-term, productive partnership that has delivered amazing AI tools for everyone. Talks are ongoing and we are optimistic we will continue to build together for years to come," OpenAI and Microsoft said in a joint statement emailed to Reuters. The report comes at a time when one of the most pivotal partnerships in the field of AI is under strain. OpenAI needs Microsoft's approval to complete its transition into a public-benefit corporation. But the two have not been able to agree on details even after months of negotiations, according to sources. Microsoft partnered with OpenAI in 2019, investing $1 billion to support the startup's development of AI technologies on its Azure cloud platform.

OpenAI And Microsoft Reportedly At Odds Over Access To Artificial General Intelligence: 'Talks Are Ongoing And We Are Optimistic' - Microsoft (NASDAQ:MSFT)

OpenAI and Microsoft Corporation MSFT are reportedly in a dispute over a contractual clause regarding access to Artificial General Intelligence (AGI). What Happened: The two companies are at odds over a provision in their partnership agreement that would limit Microsoft's access to AGI once OpenAI achieves it, reported Reuters (via The Information). Microsoft has requested that OpenAI remove the clause, but the company has reportedly refused. See Also: Mark Zuckerberg Warns Of 'Serious Disadvantage' As China's Data-Center Blitz Could Let DeepSeek Leapfrog US AI Labs In response to the ongoing talks, both companies gave a joint statement to the publication, saying, "We have a long-term, productive partnership that has delivered amazing AI tools for everyone. Talks are ongoing and we are optimistic we will continue to build together for years to come." Subscribe to the Benzinga Tech Trends newsletter to get all the latest tech developments delivered to your inbox. Why It's Important: Previously, during a New York Times podcast interview, OpenAI CEO Sam Altman addressed rumors of tension with Microsoft, confirming the tech giant remains supportive and that he had a "super nice call" with Satya Nadella. While he acknowledged some friction, he said that the partnership has been mutually beneficial. Last month, it was reported that OpenAI plans to reduce the share of revenue it pays to Microsoft from 20% to 10% by 2030, according to internal financial projections shared with investors. Earlier this month, OpenAI also confirmed that its annualized revenue run rate has doubled to $10 billion, up from $5.5 billion at the end of 2024. This figure excludes Microsoft licensing and large one-time deals, focusing on recurring revenue. ChatGPT now has 500 million weekly active users as of March. Benzinga's Edge Stock Rankings show a positive outlook for Microsoft over the short, medium and long term. Additional detailed metrics are available here. Photo Courtesy: Ascannio On Shutterstock.com Check out more of Benzinga's Consumer Tech coverage by following this link. Read Next: Cathie Wood Dumps Palantir As Stock Touches Peak Prices, Bails On Soaring Flying-Taxi Maker Archer Aviation Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. MSFTMicrosoft Corp$492.500.05%Stock Score Locked: Edge Members Only Benzinga Rankings give you vital metrics on any stock - anytime. Unlock RankingsEdge RankingsMomentum69.65Growth50.54Quality34.07Value13.23Price TrendShortMediumLongOverviewMarket News and Data brought to you by Benzinga APIs

OpenAI and Microsoft: a worrying clause

It is perhaps the most iconic partnership in the history of artificial intelligence. And yet it is faltering. The fault lies with a key clause in their agreement, linked to GAI. The acronym refers to General Artificial Intelligence, an AI capable of surpassing humans in all areas, with the potential to acquire all human knowledge and the ability to learn on its own, or even create other, even more powerful AIs. This is how Ilya Sutskever, co-founder of OpenAI, described it during a TED talk. And this is the scenario that Microsoft fears. An explosive clause The agreement between OpenAI and Microsoft stipulates that if a GAI is developed, OpenAI retains the power to decide whether Microsoft will have access to it. This is a provision that the Redmond tech giant wants to remove. But, according to a recent report, OpenAI is opposed to this. How could such a clause have been signed? Did Microsoft's lawyers miss it? Unlikely. Officially, the clause is intended to prevent malicious use of GAI by Microsoft. But as this technology becomes more plausible, Microsoft wants to redefine the terms. Tense dialogue Discussions between both partners are continuing, although the tone is hardening. According to the Financial Times, Microsoft is threatening to suspend negotiations if no common ground is found on sensitive issues, such as its share in OpenAI in the event of an IPO. Meanwhile, OpenAI is reportedly considering denouncing its ally's anti-competitive practices. A story already covered in our columns: The future partnership between Microsoft and OpenAI hangs in the balance. Is a breakup on the cards? The relationship has been fragile for several years. This comes as no real surprise, as it is difficult to be both partners and competitors. The New York Times had already revealed the existence of this controversial clause and the first signs of tension last October. If the divorce goes ahead, it is likely to cause a stir.