Credit: Benj Edwards / OpenAI / Microsoft

OpenAI executives have discussed filing an antitrust complaint with US regulators against Microsoft, the company's largest investor, The Wall Street Journal reported Monday, marking a dramatic escalation in tensions between the two long-term AI partners. OpenAI, which develops ChatGPT, has reportedly considered seeking a federal regulatory review of the terms of its contract with Microsoft for potential antitrust law violations, according to people familiar with the matter.

The potential antitrust complaint would likely argue that Microsoft is using its dominant position in cloud services and contractual leverage to suppress competition, according to insiders who described it as a "nuclear option," the WSJ reports.

The move could unravel one of the most important business partnerships in the AI industry—a relationship that started with a $1 billion investment by Microsoft in 2019 and has grown to include billions more in funding, along with Microsoft's exclusive rights to host OpenAI models on its Azure cloud platform.

The friction centers on OpenAI's efforts to transition from its current nonprofit structure into a public benefit corporation, a conversion that needs Microsoft's approval to complete. The two companies have not been able to agree on details after months of negotiations, sources told Reuters. OpenAI's existing for-profit arm would become a Delaware-based public benefit corporation under the proposed restructuring.

The companies are discussing revising the terms of Microsoft's investment, including the future equity stake it will hold in OpenAI. According to The Information, OpenAI wants Microsoft to hold a 33 percent stake in a restructured unit in exchange for foregoing rights to future profits. The AI company also wants to modify existing clauses that give Microsoft exclusive rights to host OpenAI models in its cloud.

The restructuring debate attracted criticism from multiple quarters. Elon Musk alleges that OpenAI violated contract provisions by prioritizing profit over the public good in its push to advance AI and has sued to block the conversion. In December, Meta Platforms also asked California's attorney general to block OpenAI's conversion to a for-profit company.

Partnership strained as OpenAI sought new cloud providers

Last year, the US Federal Trade Commission under the Biden administration began examining the Microsoft-OpenAI partnership in more detail. Microsoft's $13 billion investment in OpenAI prompted competitors like Google to argue that the deal harmed competition by saddling rivals with extra costs and blocking them from hosting OpenAI's latest models themselves, along with what were then Microsoft's exclusive rights to host OpenAI models on its Azure cloud platform.

However, Microsoft is no longer OpenAI's exclusive cloud provider as of January, and earlier this month, Reuters reported that OpenAI plans to add Alphabet's Google Cloud service to meet its growing needs for computing capacity, marking a notable collaboration between two AI rivals. The shift came alongside OpenAI's participation in the Stargate Project, a new company that intends to invest $500 billion over the next four years in building new AI infrastructure for OpenAI in the United States.

Meanwhile, Microsoft and OpenAI have maintained a public front of cooperation. "Talks are ongoing and we are optimistic we will continue to build together for years to come," they said in a joint statement to Reuters. In January, a Microsoft blog post noted that "key elements" of the partnership remain in place for the duration of their contract through 2030, including revenue-sharing arrangements. Microsoft has the rights to OpenAI IP (including models and infrastructure) for use within products like Copilot through 2030.