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Thursday, July 25, 2024

Microsoft, Apple will not join OpenAI’s board as regulatory scrutiny grows

Microsoft and Apple, the two most important partners of ChatGPT-maker OpenAI, will not have advisory roles on the company’s board of directors, as governments in the United States and Europe take a closer look at the power Big Tech companies have over leading artificial intelligence start-ups.

Microsoft, which has invested billions into OpenAI, received a nonvoting seat on the company’s board after a dramatic boardroom shake-up last year led to CEO Sam Altman being fired and then reinstated days later. Apple was slated to take an advisory board role as well after striking a deal to integrate ChatGPT into its products last month, Bloomberg News previously reported, but any such plan will not go ahead. OpenAI confirmed its board will not include any advisory seats going forward.

A Microsoft spokesperson confirmed that the company will relinquish its board seat. An Apple spokesperson did not respond to a request for comment. The Financial Times first reported the two companies’ withdrawals.

In the absence of formal board roles for its most prominent partners, OpenAI will have regular meetings for major investors and partners. Those will be open to Apple and Microsoft, OpenAI spokesperson Kayla Wood said in an email. “We look forward to continuing to receive feedback and advice from these key stakeholders.”

The rise of OpenAI and other AI start-ups such as Anthropic, spurred by interest in ChatGPT and other chatbots, shook up the tech industry last year. Analysts and tech leaders have suggested that the newcomers could usurp some of the power of dominant players such as Microsoft.


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But OpenAI and other leading AI start-ups have become dependent on investment from the largest tech companies because of the immense costs of developing cutting-edge AI. Algorithms behind systems like ChatGPT are trained using expensive and power-hungry computer hardware.

Microsoft invested billions in OpenAI in early 2023, while Anthropic took on funding from Google and Amazon last year as well. But those deals have drawn attention from regulators. (Amazon founder Jeff Bezos owns The Washington Post.)

In January, the Federal Trade Commission said it would look into whether the investments and partnerships between AI companies and Big Tech are stifling true competition. “Our study will shed light on whether investments and partnerships pursued by dominant companies risk distorting innovation and undermining fair competition,” FTC Chair Lina Khan said in a statement at the time.

Last month, Khan’s agency reached a deal with the Justice Department that lays the groundwork for the FTC to probe Microsoft and OpenAI’s partnership.

Microsoft giving up a formal role on OpenAI’s board is unlikely to resolve the FTC’s concern about the relationship between the two companies, according to an agency official, who spoke on the condition of anonymity to discuss the private matter. The official said the move suggests that the companies recognize that their deal may pose “serious” antitrust issues.

OpenAI has been hiring lawyers and lobbyists at a rapid pace as it has grown and faced more legal and regulatory pressure. The company is facing a growing number of lawsuits from news organizations, authors and other content creators who say the company used their copyrighted work to train its AI algorithms without payment or permission.

Despite its prominence, OpenAI’s business is still nascent, and it needs to find many more customers if it is to turn a profit. Forming alliances with Big Tech can help AI start-ups gain access to billions of paying customers around the world, an easier path than developing new products from scratch.

OpenAI and Apple framed their recent deal as mutually beneficial, with Apple enhancing the iPhone by providing access to ChatGPT and OpenAI getting its technology introduced to users of Apple phones and computers.

Microsoft’s advisory role on OpenAI’s board was announced after the AI company’s dramatic boardroom showdown in November. Most of the company’s previous board voted to fire Altman, a move that drew outrage and shock from the tech world and threats from the majority of the company’s employees to leave the company. Altman was reinstated several days later, in a deal that saw almost all board members step down.

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