OpenAI-Microsoft Feud Escalates: Legal Showdown Looms as Tensions Boil Over

Silicon Valley''s favorite AI power couple is headed for splitsville—and the breakup could get messy.

Once inseparable, OpenAI and Microsoft now trade barbs like a divorcing couple fighting over custody of ChatGPT. The boardroom drama''s spilled into public view, with both sides lawyering up for what could be the tech trial of the decade.

Who gets the IP in the divorce? Who keeps the GPUs? The only certainty: lawyers always win.

Meanwhile in Redmond, Satya Nadella quietly increases Microsoft''s AI research budget—because nothing fuels innovation like a good old-fashioned corporate grudge match. Wall Street analysts predict the feud will ''create shareholder value'' (translation: burn piles of cash).

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Microsoft first partnered with OpenAI in 2019 and has since invested a massive $14 billion into the start-up company, becoming one of the major backers behind ChatGPT and other AI technologies. In recent years, however, the relationship between Microsoft and OpenAI has soured to the point where OpenAI is now considering seeking a federal regulatory review of its contract with Microsoft for potential violations of antitrust laws, as well as launching a public campaign to discredit the technology giant.

OpenAI-Microsoft Partnership Reaches an Impasse

One of the focal points of impasse is that OpenAI requires Microsoft’s permission to convert into a public-benefit entity, but the two sides have been unable to reach any amicable agreements on the matter. The two are said to be discussing revising the terms of Microsoft’s investment, particularly its potential future equity stake in the AI startup. However, their differences have reached a “boiling point” and threaten to end up in court.

Such a MOVE by OpenAI would severely damage one of the most vital technology partnerships in the AI field and might even end the relationship between the two companies altogether. Analysts appear to agree that the partnership has benefitted both Microsoft and OpenAI in securing a large share of the lucrative AI market.

Nonetheless, OpenAI seems to be looking for ways to cut its reliance on Microsoft. OpenAI has announced plans to adopt Microsoft rival Alphabet’s (GOOGL) Google Cloud service to meet its increasing computational power requirements, a move that has caused greater tensions between the two companies. Last year, Microsoft relinquished its observer seat on OpenAI’s board of directors to address antitrust concerns.

Is Microsoft a Long-Term Buy?

On TipRanks, MSFT stock has a Strong Buy consensus rating, based on 25 Buys and four Hold ratings. Also, the average Microsoft price target of $520.96 implies 8.7% upside from current levels. Year-to-date, MSFT stock has gained 14.1%.