Court documents reveal Microsoft's early fears that OpenAI would defect to Amazon

Emails obtained in litigation over OpenAI's direction reveal that Microsoft executives in 2017 worried the AI startup would leave for Amazon's cloud if not offered substantial compute resources. When OpenAI proposed $300 million in Azure credits to expand its Dota 2 research beyond what it was already using, Microsoft's then-Azure chief Jason Zander questioned whether the company could justify the spend. Zander stated the deal would require OpenAI to generate over $500 million in direct incremental revenue for Microsoft to make sense financially.

Kevin Scott, Microsoft's CTO, articulated a different concern: the reputational risk of losing OpenAI. In a January 2018 email to CEO Satya Nadella, Scott flagged that OpenAI's growing credibility in the AI community and recruiting success meant it could become an influential voice—and that Microsoft faced downside if OpenAI departed and publicly criticized Azure. Scott acknowledged he had been dismissive of OpenAI's work at the time, but recognized the startup was moving toward natural language processing in ways that could threaten Microsoft's competitive position against Google.

Microsoft shifted course following Scott's assessment. About a month after his reassessment, the company announced a $1 billion investment in OpenAI in 2019, representing a change in both financial commitment and strategic thinking about the startup's long-term importance. The partnership tightened over subsequent years, with OpenAI agreeing to prioritize Azure for its deployment and development needs.

The arrangement has now unraveled in practice. OpenAI recently announced it would license its models to AWS and told staff that Microsoft's exclusive contractual constraints had prevented the company from reaching customers who rely on Amazon Bedrock. The shift validates the competitive scenario Scott had articulated nearly a decade earlier, though the outcome emerged through formal renegotiation rather than acrimonious departure.