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Business Insider
30 minutes ago
- Business Insider
Inside the battle over Microsoft's access to OpenAI's technology
The future of the most important partnership in technology depends on Microsoft 's access to the artificial intelligence powering ChatGPT. When OpenAI first demoed a breakthrough feature in May 2024, allowing users to talk to its AI just like a person, it looked as if the company did so in lock-step with its partner and investor, Microsoft. Soon after OpenAI demoed this voice capability for its new GPT-4o model, Microsoft CEO Satya Nadella included it in a keynote speech at the company's Build developer conference. Behind the scenes, Microsoft had little knowledge of the feature until days before the demo, people involved in the matter told Business Insider. While the agreement between the two companies gives Microsoft access to OpenAI's technology, exactly what OpenAI has to share — and when — is sometimes a gray area. In this case, Microsoft had access to frequent updates of the core model at the time, but not the voice technology OpenAI built on top of it. Microsoft found out about the demo, and pressured OpenAI executives, including then-technology boss Mira Murati, to get access to the code so Microsoft could do its own announcement, the people said. The company did not want to appear flat-footed to investors, to whom the company has to justify its $13 billion investment in OpenAI, they said. The example illustrates the ongoing complexity of Microsoft's relationship with OpenAI, and why access to the AI startup's technology is a core issue as the companies renegotiate their agreement. OpenAI needs Microsoft's blessing for a corporate restructuring. To get that, OpenAI may need to convince Microsoft to change or give up some pretty sweet terms: Microsoft has access to much of OpenAI's technology, exclusive rights to sell it on Azure, first right of refusal to provide computing resources, and a revenue-sharing agreement worth billions of dollars. Lots of thorny details about points of contention in the negotiations have made recent headlines — a looming, existential clause OpenAI could activate to cut off Microsoft's access, a "nuclear option" reportedly considered by OpenAI executives to accuse Microsoft of anticompetitive behavior, and a report that Microsoft was prepared to walk away from the renegotiations. In response to those reports, Microsoft and OpenAI released a joint statement saying, "Talks are ongoing and we are optimistic we will continue to build together for years to come." People close to Microsoft's side of the negotiating talks tell BI the software giant is unlikely to walk away because it is deeply reliant on OpenAI's intellectual property, and the negotiations are an opportunity to improve and expand its access to this technology. It's all about IP Microsoft has significantly benefited from its arrangement to access the rights to OpenAI's intellectual property, both by selling it to customers through the Azure OpenAI service and creating its own products using OpenAI's technology, like its AI assistant Copilot. There are limits, however, to what the companies consider "IP." For example, Microsoft gets access to important aspects of OpenAI's models, like model weights that help determine AI outputs and inference codes that instruct the models on how to use data, the people said. Some things are excluded from what the companies consider IP, like product and user interface information, they said, and the point at which OpenAI must share any technology is up to interpretation. One person with knowledge of OpenAI's operations said the company doesn't have to share what it's developing until it's finished, which can be subjective. "You can make sure you share something with Microsoft as late as possible, so they can still simultaneously announce, but make it really difficult to build the same product on top of it," the person said. Plus, having access to the IP isn't the same as knowing how to use it. This has been harder than expected, several people told BI. OpenAI has grown frustrated with Microsoft's request to spell out the technology to its employees, people with knowledge of both companies said. Sometimes, Microsoft doesn't know what questions to ask of OpenAI. Microsoft formed a new AI organization two years ago and hired Mustafa Suleyman, the former Inflection CEO who cofounded the AI pioneer DeepMind, to run it. The hiring was meant as a hedge against OpenAI, after Nadella received pressure from Microsoft's board to diversify following instability at its partner startup and CEO Sam Altman's ouster. However, little has come of that in terms of replacing Microsoft's need for its partnership with OpenAI, the people said. Suleyman has completely rebuilt Microsoft's Copilot app. That effort has yet to achieve much growth for Copilot. His team is focused on building smaller models and has seen success with post-training existing models for new purposes, one of the people said. Overall, Microsoft isn't trying to build frontier models like those that would compete with GPT, and is instead putting resources toward OpenAI, they said. Microsoft is less worried about AGI, antitrust, Windsurf, or SoftBank Other points of contention that have made recent headlines are of less concern to Microsoft, the people with knowledge of Microsoft's position said. Included in the agreement is a clause that would allow OpenAI to declare what's called artificial general intelligence or "AGI," and cut off Microsoft's access to OpenAI's IP and profits. OpenAI defines AGI as "a highly autonomous system that outperforms humans at most economically valuable works." While OpenAI could declare AGI, the concept is so open to interpretation that Microsoft could sue and easily tie the company up in a legal battle for years, the people said. There's another version of the clause, "sufficient AGI," that OpenAI could declare when it builds a technology capable of achieving a certain level of profits, but Microsoft has to sign off on that. Another apparent sticking point in the negotiations has centered on OpenAI's desire to acquire AI coding assistant startup Windsurf. Under the current agreement, that would give Microsoft access to Windsurf's technology. Microsoft has said it would agree to the acquisition, but Windsurf's CEO doesn't want the company's technology to be shared with Microsoft, one of the people said. While GitHub Copilot faces increasing competition from other AI coding assistants, access to Windsurf's technology is not a big desire for Microsoft, and the company might consider a carve-out of Windsurf IP in a new deal, the person said. OpenAI executives have reportedly considered accusing Microsoft of anticompetitive behavior. Microsoft is largely unconcerned about this, two of the people said. The existing deal was investigated by antitrust regulators, including the European Union and the United Kingdom's Competition and Markets Authority. OpenAI's desire to restructure is in part motivated by a deadline from investor SoftBank that risks a percentage of funding if OpenAI can't close such a deal by the end of the year. OpenAI has said it struggled to fundraise due to its peculiar structure. SoftBank has a reputation for taking risks with its funding, and its CEO is keen on OpenAI, so some observers doubt SoftBank will follow through on its deadline to revoke funding if a new deal isn't reached.
Bloomberg
32 minutes ago
- Bloomberg
EU and UK MiFIR/MiFID II reforms: Navigating the upcoming data challenges
Transparency thresholds: Two paths, one complexity The current regime provides a complex system of waivers (for pre-trade transparency obligations) and deferrals (for post-trade transparency obligations). These rely on size thresholds calculated and published annually by the regulators. Namely, these are the Large in Scale (LiS) and the Size Specific to the Instrument (SSTI) thresholds. Both regulators are phasing out the SSTI thresholds and moving away from a system that requires them to calculate and publish the relevant transparency thresholds. However, this is the only common ground between the two regimes going forward. In the EU, bonds will be grouped according to certain characteristics and post-trade deferrals will follow a system that combines the issuance size as a proxy of liquidity of the instrument with the size of the transaction. Price and volume information can then be published within specific time schedules that go from 15 minutes to four weeks. As a result of the new deferral regime, the number of trades below thresholds (hence need to be reported in real-time) will rise significantly, encompassing 87% to 96% of all transactions depending on asset classes. Similarly, in the UK bonds will be grouped according to certain characteristics (some of which are the same as for the EU rules) but they follow a more granular grouping. The deferral schedules go from 1 day to three months, according to the size of the transaction. Trades below thresholds will be reported in real time. Importantly, from next year, the growing volume of liquid instruments and trades reportable in real time will be consolidated and disseminated through single data feeds (Consolidated Tapes) in both the EU and the UK, which will add to the significant transformation that non-equity market transparency will undergo in coming months. The UK has also finalized the transparency regime applicable to derivatives. The first change is that only certain OTC derivatives will be in scope. This will substantially reduce the number of OTC derivatives in scope of transparency rules in the UK. The deferral schedule is such that price transparency is prioritized over volume transparency. This will result in the price information being allowed a deferral of up to one day and volume deferral to laps at end of the following quarter for volume information for larger trades. Volume caps: Convergence or disappearance? Dark pool trading has long been governed by volume caps. Under the EU's MiFIR Review, the Double Volume Cap (DVC), which currently combines a 4% trading venue cap with an EU wide cap of 8% will be replaced with a Single Volume Cap (SVC). Under SVC only 7% of all trading in a stock can be done under waiver without pre-trade transparency requirements. This will be effective as of October 2025. Meanwhile the UK has already retired volume caps entirely for equities, opting not to replace them. How Bloomberg can help As we are transitioning to new regime, market participants will face two key challenges: The divergence between the EU and UK transparency regimes for non-equity instruments. Regulators moving away from publishing the relevant transparency information and instead requiring the market to work out the relevant thresholds and parameters according to the new rules. To help clients understand how to classify non-equity instruments in the EU and UK, Bloomberg is updating its MiFID solution to reflect the changes across both jurisdictions. These changes will be made in alignment with the effective dates of EU and UK MiFIR/MiFID II reforms. Changes include:
Yahoo
an hour ago
- Yahoo
Trump's Brag About ‘BOOMING' Economy Immediately Gets a Humiliating Reality Check
President Donald Trump's trade policies are triggering a global economic downturn, but the president apparently hasn't gotten the memo. 'Because of Tariffs, our Economy is BOOMING!' Trump boasted in a Truth Social post early Tuesday. Within hours, a damning economic forecast came to the opposite conclusion. The Paris-based OECD released a forecast predicting global economic growth will slow to 2.9 percent this year, down from 3.3 percent in 2024. The U.S. economy, in particular, is expected to see its growth slow from 2.8 percent to just 1.6 percent, Bloomberg reported. The OECD's economists cited Trump's tariff chaos as the major driver of the gloomier outlook. The combination of trade barriers and economic uncertainty is lowering confidence and hurting investment, while adding to inflationary pressures, the report said. A smaller federal workforce is also contributing to the downgrade. 'Lower growth and less trade will hit incomes and slow job growth,' the OECD's chief economist Alvaro Pereira told Bloomberg. The situation could get worse yet if the U.S.'s trade partners retaliate against the tariffs, confidence drops even further, or stock markets go through another bout of turmoil, according to the OECD. Trump's tariff policy continued its wild ride this week as a court ruled against the president's signature economic policy—which will nevertheless remain in effect while an appeal is heard—and the U.S. and China accused one another of violating the terms of a cooling-off period agreed to last month. China was the main target of Trump's April 2 'Liberation Day' tariff announcements, which sparked global market turmoil. The two countries quickly entered an all-out trade war, with Trump raising baseline tariffs on Chinese imports to 145 percent, while Beijing retaliated with its own 125 percent import tax on U.S. goods. The two sides agreed in mid-May to lower the temperature, with the U.S. imposing a 30 percent duty on goods from China, and Beijing reducing its tariffs on U.S.-made products to 10 percent. Over the weekend, Trump accused China of having 'TOTALLY VIOLATED' the agreement, while China hit back that the U.S. has 'unilaterally and repeatedly provoked' new trade frictions. Trade ministers from the OECD's 38 member countries are scheduled to convene in Paris this week, including U.S. trade representative Jamieson Greer, EU trade commissioner Maros Sefcovic, and Chinese Ministry of Commerce official Lin Feng, according to Bloomberg. The leaders will try to ease trade tensions and lower tariffs to improve growth and combat rising prices.
