The so-called dream partnership between OpenAI CEO Sam Altman and Microsoft’s CEO Satya Nadella is falling apart fast, according to the Wall Street Journal. Altman once called it the “best partnership in tech,” but now the two giants are fighting over everything from computing power to who controls the future of AI.

After Microsoft poured billions into OpenAI and watched ChatGPT hit 500 million users a week, cracks started to show.

Altman and Nadella are no longer on the same page about how much power Microsoft gives, how much access Microsoft gets, and whether OpenAI is close to building human-like intelligence.

Tensions exploded when Microsoft decided it was time to push Copilot, its own version of ChatGPT, and quietly started working to rely less on Altman’s company. Nadella even went behind Altman’s back to hire a top AI figure who launched a secret plan to build Microsoft’s own powerful models.

Despite preparing to go their separate ways, both companies still have knives pointed at each other’s throats. Microsoft can block OpenAI’s plan to change into a full-blown for-profit company, a decision that could cost Altman’s company tens of billions if it doesn’t happen by year-end.

A stairwell meeting kicks off six years of billions

Altman and Nadella first crossed paths in the summer of 2018 at an Allen & Co. event in Sun Valley, Idaho. Altman, who had founded OpenAI as a nonprofit just three years before, bumped into Nadella in a stairwell.

In five minutes, Altman said he was “going to raise a bunch of money,” according to his 2023 comments to the Journal. They decided to keep talking after the conference.

By 2019, Microsoft threw $1 billion into OpenAI, securing exclusive access to its models and locking in OpenAI’s cloud hosting. It was a smart move. In 2022, OpenAI released ChatGPT, forcing Alphabet and Meta to panic and redo their product plans.

Microsoft, once seen as aging and boring, suddenly became a hot name again and, briefly, the world’s most valuable company. Nadella and Altman were texting each other almost nonstop during the good times.

When teams hit deadlocks, Altman would just screenshot his texts with Nadella and post them straight into OpenAI’s Slack, moving things along. Early in 2023, Microsoft dropped another $10 billion into OpenAI, letting Altman rent more Microsoft data centers for new model training.

Without telling Altman, Nadella started meeting with Mustafa Suleyman, a DeepMind co-founder. They had several talks, including at Davos in early 2024, where Nadella also shared a panel with Altman. Microsoft paid $650 million to hire Suleyman and his crew from Inflection, giving them orders to build a model that could stand up to OpenAI’s GPT-4.

Hiring wars and a messy fight for AI control

Trying to match OpenAI’s GPT-4 didn’t go smoothly. An early model built by Suleyman’s team couldn’t deliver, so Microsoft had to stick with relying on OpenAI longer than it wanted.

In one meeting about intellectual property, Suleyman reportedly yelled at OpenAI’s lawyers in front of key executives like then-CTO Mira Murati. Suleyman did not respond to requests for comment.

Meanwhile, one of the nastiest fights broke out over whether OpenAI was close to creating humanlike intelligence. Their contract says that once OpenAI crosses that line, the board can change its deal with Microsoft.

Altman told people he was confident his team could get there. Microsoft’s side wasn’t buying it. Negotiators told OpenAI that current models weren’t even close. Nadella dismissed the idea as “nonsensical benchmark hacking” on a February podcast.

OpenAI executives were stunned. On top of that, Altman wanted more computing power and better chips from Microsoft. Microsoft pushed back, saying it was already giving as much as it could and had loosened some exclusivity terms.

Tensions hit another high last summer when Microsoft got annoyed that OpenAI delayed handing over code for a new reasoning model called Strawberry. People familiar with what happened said OpenAI needed extra time to figure out what the model could do before sharing it.

Today, Altman and Nadella barely text each other. Their communications are limited to scheduled weekly calls. Microsoft and OpenAI were talking about launching a massive new data center project, but that got iced after Altman was temporarily kicked out by his board.

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