Microsoft Considers Suing to Halt Amazon-OpenAI Cloud Deal

Microsoft is reportedly considering legal action over Amazon and OpenAI’s new cloud deal.

As the Financial Times (FT) reported Wednesday (March 18), the issue hinges on whether Amazon Web Services (AWS) can offer OpenAI’s new Frontier commercial product without breaking an agreement requiring all access to OpenAI’s models to be run through Microsoft’s Azure cloud platform.

That agreement, the report added, is a lucrative one for Microsoft, which has seen Azure revenues reach record highs thanks in part to OpenAI’s products.

Reached for comment by PYMNTS, a spokesperson for Microsoft shared this statement:

“OpenAI and Microsoft recently stated together that ‘Azure remains the exclusive cloud provider of stateless OpenAI APIs.’ We are confident that OpenAI understands and respect the importance of living up to this legal obligation.”

OpenAI and Amazon say they are working on a system that works around the contract, while Microsoft executives argue this approach would not work and would violate the company’s agreement with OpenAI, sources familiar with the discussions told the FT.

Prior to Frontier’s debut last month, the companies were still holding talks to end the disagreement without resorting to legal action, the sources added.

“We know our contract,” said a person familiar with Microsoft’s position. “We will sue them if they breach it. If Amazon and OpenAI want to take a bet on the creativity of their contractual lawyers, I would back us, not them.”

Meanwhile, a source familiar with OpenAI’s positions says the company thinks its plans with Amazon and its deal with Microsoft are compatible.

This source added that Microsoft was unlikely to pursue litigation and open itself to scrutiny while it is dealing with regulatory investigations tied to its cloud business.

The news comes one day after a report that AWS and OpenAI had struck a deal that would help OpenAI sell its services to the federal government. AWS is already a major cloud provider to several government agencies, and has agreed to sell OpenAI products to other U.S. government customers, The Information reported, citing sources familiar with the matter.

Also Tuesday (March 17), Amazon CEO Andy Jassy said the growth of artificial intelligence (AI) could push sales of AWS offerings to twice the level he once expected.

Per a report from Reuters, the CEO said at an internal, all-hand meeting that he had expected for years that AWS could be an annual revenue run rate business of $300 billion in 10 years. Thanks to AI, Jassy now expects that it “has a chance to be at least double that.”