Posted by meetpateltech 1 day ago
What's the value in investing in a smaller company and then giving up things produced off that investment when the company grows?
An investor can be stubborn about retaining all rights previously negotiated and never give them up... but that absolutist position doesn't mean anything if the investment fails.
OpenAI needs many more billions to cover many more years of expected losses. Microsoft itself doesn't want to invest any more money. Additional outside investors don't want to add more billions in funding unless Microsoft was willing to give up a few rights so that OpenAI has a better competitive position against Google Gemini, Anthropic, Grok etc.
When a startup is losing money and desperately needs more capital, a new round of investors can chip away at rights the previous investor(s) had. Why would previous original investors voluntarily agree to give up any rights?!? Because their investment is at risk if the startup doesn't get a lot more money. If the original investor doesn't want to re-invest again and would rather others foot the bill, they sometimes have to be a little flexible on their rights for that to happen.
This looks more like Microsoft ensuring that they'll win, regardless of how OpenAI fairs in the next four to six years.
Having a customer locked in to buying $250bn of Azure services is a fairly big benefit.
"Microsoft will no longer have a right of first refusal to be OpenAI’s compute provider."
Seems like a loss to me!
What probably happened:
1. MS's accountants raised a warning
2. Existing agreement prohibited disclosure of terms
3. MS told OpenAI that wasn't acceptable and MS needed to publicly report details today
4. OpenAI coordinated release of this, to spin the narrativehttps://blogs.microsoft.com/blog/2025/10/28/the-next-chapter...
Also: Built to Benefit Everyone — by Bret Taylor, Chair of the OpenAI Board of Directors
Whats my share then?
If inference stays too expensive, then I don't know what happens, maybe a few people will pay for it.
The best part is that the web is forever poisoned now, 80% of the content is generated by LLM and self poisoning
Anecdata: our product is using a number of these models in production.
Ironically, I'll bet you $500 that OpenAI and Anthropic's models are far more subsidized. We can be almost sure about this, given the losses that they post, and the above fact. These providers are effectively hardware plays, they can't just subsidize at scale and they're a commodity.
On top of that I also mentioned size vs quality, where they're also frontier. Size ≈ cost.
Perhaps their big bet is that their partnership with Jony Ive will create the first post-phone hardware device that consumers attach themselves with, and then build an ecosystem around that?