Episode summary
OpenAI Breaks From Exclusive AI Pact With Microsoft | Bloomberg Intelligence
Bloomberg Intelligence
· · Hosts: Paul Sweeney, Scarlet Fu · Guests: Ed Ludlow, Bailey Lipschultz, John Butler, Sid Philip
Summary
Microsoft and OpenAI agreed to unwind parts of their tightly linked relationship: Microsoft will no longer pay revenue to OpenAI, and the startup will no longer be locked into an exclusive sales arrangement. The guest said the change lets OpenAI sell its models on any cloud, with Amazon seen as a likely beneficiary, while Microsoft remains a major investor and cloud supplier. He also said the move fits a broader shift as OpenAI prepares for a possible IPO and as China continues to restrict technology access across borders.
The discussion then turned to Bill Ackman’s Pershing Square IPO, which is expected to raise about $5 billion, the low end of the original target range. The guest said investors are mainly buying access to the hedge fund rather than the closed-end fund wrapper, though the fund trades at about a 32% discount in London. He framed the deal as a test of whether investors want active management exposure even when passive investing has recently outperformed.
On telecom, the analyst said Verizon’s first-quarter gain of 55,000 mobile subscribers reflected tighter promotions, AI-driven cost cuts, and better churn. He said Verizon is trying to balance wireless and fiber growth, while T-Mobile is likely to surprise more on broadband. In aviation, the guest said United’s effort to merge with American has been rebuffed, and that high fuel costs may push more consolidation and possible government aid for Spirit and other low-cost carriers.
Key takeaways
- The guest said Microsoft is ending OpenAI revenue sharing and exclusivity, which should let OpenAI sell models more broadly, including on Amazon’s cloud.
- He said OpenAI’s changing structure and broader business model make a future IPO look increasingly plausible.
- Bailey Lipschultz said Pershing Square’s IPO is targeting about $5 billion, and investors primarily want hedge fund exposure rather than the closed-end fund itself.
- John Butler said Verizon added 55,000 mobile subscribers because of more disciplined promotions, AI-led cost cuts, and lower churn.
- Sid Philip said United’s approach to merge with American was rejected, and high fuel prices are increasing pressure for airline consolidation and possible government support.
Notable quotes
“Microsoft will no longer pay revenue to Open AI and said its partnership with the leading artificial intelligence firm will not be exclusive going forward”
“open AAI can now run but also sell its models on any cloud and you'll note that our colleagues in BI their main takeaway is from this is that Amazon will be a big beneficiary”
“This quarter, thanks to Dan Schulman and a change in strategy there, we're seeing post-paid net ads driven mostly by improved churn”
How the episode opens
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Here's some news out today. I think it's important, but I'm not sure. Microsoft will no longer pay revenue to Open AI and said its partnership with the leading artificial intelligence firm will not be exclusive going forward.
Microsoft stocks down just fractionally on the news here. I'm not sure what they're read into it, but our next guest does know, Ed Lllo, B Tech Co uh host. He is in our San Francisco studio.
Uh Ed, can you explain this news to us and and what it means? Uh I would say this is important and it's the latest development in a series of a changing relationship. And so Microsoft critically important mega cap tech name and OpenAI let's call it the the most profound um AI company uh in this generation of AI companies.
And basically what Microsoft is allowing Open AI to do is sell its products elsewhere. um for a long time they've been tweaking the exclusivity by which Microsoft gets first dibs or first access to open AAI's tech and also is a major distribution platform for open AI's tech to third parties. So the net result is like open AAI can now run but also sell its models on any cloud and you'll note that our colleagues in BI their main takeaway is from this is that Amazon will be a big beneficiary of that decision.
Um but there's also some mechanical stuff. So, believe it or not, Microsoft is the biggest shareholder of OpenAI. It has like 27% stake, but for a really long time, it's been paying money to Open AAI as a share of revenue from revenues it generates using Open AI's tech.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- openai microsoft exclusivity pact
- ai model distribution
- telecom mobile subscriber growth
- airline merger talks
- closed-end fund ipo fundraising
Companies and tickers mentioned
- MSFT
- AMZN
- VZ
- UAL
- AAL
- Microsoft
- OpenAI
- Amazon.com
- Verizon Communications
- United Airlines
- American Airlines Group
- BTech
- Billionaire Bill Ackman’s IPO / closed-end fund and alternative asset management company
Watch the episode
Watch “OpenAI Breaks From Exclusive AI Pact With Microsoft | Bloomberg Intelligence” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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