Microsoft relinquishes observer seat on OpenAI board amidst regulatory scrutiny

Microsoft has announced its decision to give up its observer seat on OpenAI's board, citing confidence in the artificial intelligence company's direction.

The move comes as global regulators increasingly scrutinise Big Tech's investments in AI start-ups.

In a letter to OpenAI dated 9 July, Microsoft's deputy general counsel Keith Dolliver stated, "Over the past eight months we have witnessed significant progress by the newly formed board and are confident in the company's direction. Given all of this we no longer believe our limited role as an observer is necessary."

The tech giant had taken the non-voting observer position in November 2023 following a period of turmoil at OpenAI, which saw CEO Sam Altman briefly ousted before being reinstated. Microsoft, having invested over $13 billion in OpenAI, played a crucial role in resolving the leadership crisis.

Contrary to expectations, Apple will also not take up an observer role on OpenAI's board, according to sources familiar with the matter cited by a Financial Times report. Apple had previously been announced as taking up a similar role to Microsoft on the company’s board after the iPhone maker’s recent announcement that it will integrate OpenAI's ChatGPT into its devices.

An OpenAI spokesperson explained that the company will adopt "a new approach to informing and engaging key strategic partners" by hosting regular meetings with partners such as Microsoft and Apple, as well as investors including Thrive Capital and Khosla Ventures. This new engagement strategy will be overseen by Sarah Friar, OpenAI's recently appointed first chief financial officer.

Despite relinquishing its board position, Microsoft emphasised that OpenAI remains "one of Microsoft's most valued partners". The company's investment in OpenAI has been crucial for both parties, with OpenAI relying on Microsoft for computing power and cloud storage worth billions of dollars.

However, the close ties have raised questions about OpenAI's independence and Microsoft's influence over the start-up. Microsoft chief executive Satya Nadella was a key power broker during the boardroom upheaval at OpenAI in November – a frenetic several days in which OpenAI boss Sam Altman was ousted and subsequently rehired.

The withdrawal of these tech giants from board involvement comes as antitrust authorities in the EU and US examine the partnership between Microsoft and OpenAI. Regulators are concerned about potential anti-competitive practices in the rapidly growing AI sector.

The European Commission said in June it was exploring the possibility of an antitrust investigation into the tie-up after deciding not to proceed with a probe under merger control rules. The US Federal Trade Commission meanwhile has begun examining investments made by Big Tech companies in AI start-ups.

OpenAI expressed gratitude for Microsoft's confidence, stating, "We're grateful to Microsoft for voicing confidence in the Board and the direction of the company, and we look forward to continuing our successful partnership."

OpenAI's current eight-person board includes Altman, former US Treasury Secretary Larry Summers, and Fidji Simo, chief exec of Instacart. It is chaired by Bret Taylor, former co-chief exec of Salesforce and co-founder of AI start-up Sierra.

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