Google Challenges Microsoft-OpenAI Deal Amidst Cloud AI Competitive Tensions

Google has recently petitioned the U.S. Federal Trade Commission (FTC) to terminate the exclusive cloud service agreement between Microsoft and OpenAI. This arrangement positions Microsoft as the sole provider hosting OpenAI's technology on its cloud platform, Azure, thus placing competitors like Google and Amazon at a significant disadvantage. Such companies are eager to host OpenAI's artificial intelligence models themselves to allow their cloud customers access without relying on Microsoft's infrastructure.

The intensifying competition within the cloud and AI sectors has led Google to call for regulatory scrutiny over Microsoft and OpenAI's collaborative agreement. With the FTC in active investigation regarding whether this partnership limits market competition, Google's move coincides with questions from the FTC about Microsoft's business practices.

Although exclusive deals aren't necessarily illegal, the Microsoft-OpenAI agreement could impose additional costs on users, including those related to data migration and staff training. Google, alongside others, highlights these potential burdens on users. A Google spokesperson reinforced the company's commitment to developing the world's most open AI ecosystem, expressing a desire to host as many AI models as possible.

Reports suggest that Microsoft accrues a 20% share from OpenAI's revenue, which arguably reduces its incentive to compete with OpenAI directly. The FTC is evaluating whether this exclusive arrangement restricts other companies' competitive capabilities in the AI market.

Currently, OpenAI's large language models dominate the market, forecasted to generate $3 billion in revenue this year. Microsoft benefits substantially by reselling these models. While Google and Amazon continue to market their own AI models, they struggle to match OpenAI's financial performance.

As a consequence of the exclusivity, several enterprises, such as Snap and Intuit, have found themselves increasingly reliant on Microsoft's Azure to leverage OpenAI's technology. The FTC's examination extends beyond just this exclusive agreement, also reviewing Microsoft's software licensing, cybersecurity operations, and its growing array of AI products.