--:-- [Theme music fades out]
--:-- Host (Kate Leinbaugh): Welcome to The Journal, our show about money, business, and power. I'm Kate Leinbaugh. It's Tuesday, January 28th.
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--:-- Host (Kate Leinbaugh): At the White House last week, OpenAI CEO Sam Altman was part of a big announcement. His event at the White House was alongside the leaders of three leading artificial intelligence companies that are committing billions into a joint venture called Stargate. Stargate will build data centers and help generate electricity to support AI. A $500 billion private venture to focus on AI.
--:-- Guest (Tom Doton): Alongside Altman, there was President Donald Trump and two other CEOs. One from the database software company Oracle and the other from tech investor SoftBank. What stood out to you about the presser?
--:-- Host (Kate Leinbaugh): This was clearly a big deal for all the involved people. The image of all these guys in the White House talking about this and the enormous amounts of money that they were planning to raise and deploy in service of this project. I don't know. It was a whole to-do.
--:-- Guest (Tom Doton): That's our colleague Tom Doton. Tom said there was another thing that stood out. One major player who wasn't part of the show. Not pictured, not up there talking in front of the press was Microsoft. And the CEO, Satya Nadella, was thousands of miles away in Davos for the World Economic Forum.
--:-- Host (Kate Leinbaugh): And why is that interesting that he wasn't there?
--:-- Guest (Tom Doton): Microsoft is the sugar daddy of, so to speak, of open AI. Like they have poured more money by a huge margin than anyone else into this company. And Sam Altman appears at almost every Microsoft event.
--:-- Host (Kate Leinbaugh): Welcome to The Journal, our show about money, business, and power. I'm Kate Leinbaugh. It's Tuesday, January 28th. Coming up on this show, is the biggest bromance in tech falling apart?
--:-- Host (Kate Leinbaugh): The relationship between OpenAI and Microsoft started in 2018. Their meet-cute was at a summit for business moguls, where OpenAI CEO Sam Altman ran into Microsoft CEO Satya Nadella. At the time, OpenAI needed more computing power and was looking for funding.
--:-- Guest (Sam Altman): Hi, I'm here with Sam Altman, CEO of OpenAI. Today, we are very excited to announce a strategic partnership with OpenAI. So, Sam, welcome. Thank you very much.
--:-- Host (Kate Leinbaugh): And it kind of kicks off the beginning of this multi-year and like multi-billion dollar invested relationship between these companies. Altman called OpenAI's relationship with Microsoft the best bromance in tech.
--:-- Guest (Sam Altman): The two companies had an exclusive partnership. OpenAI would get access to Microsoft's data centers and its cloud computing power. And then from the Microsoft side of things, they get exclusive early access to their software that gets built.
--:-- Host (Kate Leinbaugh): So when something like ChatGPT gets built Microsoft gets a relatively early look at it Microsoft can tweak it and build it into their own products and you know just generally get exclusive access to that company's intellectual property.
--:-- Guest (Sam Altman): The relationship between OpenAI and Microsoft worked, and it became even more serious after the 2022 release of OpenAI's viral chatbot. Chat GPT.
--:-- Host (Kate Leinbaugh): As OpenAI kept scaling up its technology, the company needed more computing power. And that's where it started butting heads with Microsoft.
--:-- Guest (Tom Doton): And so OpenAI over the years would continually ask for more resources for Microsoft. And, you know, Microsoft, they have their own projects, too, that they're building. They have software that needs cloud computing.
--:-- Host (Kate Leinbaugh): And from the Microsoft point of view, they were giving them everything that they could. They were pulling chips from other projects and giving them to OpenAI so they could train all of their models.
--:-- Guest (Tom Doton): But from OpenAI's perspective, they just weren't getting enough. So from the people you talked to, what did they tell you that OpenAI did?
--:-- Host (Kate Leinbaugh): OpenAI would say, you're not giving us enough resources. And frankly, we'd like to take our business elsewhere. We'd like to use other cloud computing platforms that will give us enough resources.
--:-- Guest (Tom Doton): And Microsoft would come back to them and say, that's a violation of our exclusivity agreement. You guys can't bring your business elsewhere.
--:-- Host (Kate Leinbaugh): And then OpenAI would respond and say, well, our agreement is that you guys give us enough resources to train our software. So you're the ones who are in violation of the agreement.
--:-- Guest (Tom Doton): And these negotiations would happen on and off over almost the entirety of their relationship.
--:-- Host (Kate Leinbaugh): Despite these tensions, the two sides remained committed to their partnership. That was visible in late 2023, when OpenAI's board of directors unexpectedly fired Altman as CEO over internal differences.
--:-- Guest (Tom Doton): But just days later, Altman was rehired. Sam Altman is back at OpenAI.
--:-- Host (Kate Leinbaugh): That's after what can only be described as, frankly, a stunning reversal in a drama that has, of course, transfixed Silicon Valley and the global tech industry.
--:-- Guest (Tom Doton): And a key player behind Altman's return was Satya Nadella. Satya plays a huge role in getting Sam reinstated. He really wanted him back in control at that company.
--:-- Host (Kate Leinbaugh): And so that's an interesting moment because in a lot of ways that kind of cemented the strength of the relationship between those two personally.
--:-- Guest (Tom Doton): But Altman was still jockeying for more and more computing power. Last year, he went out to try to raise $7 trillion from partners other than Microsoft to, among other things, manufacture semiconductor chips.
--:-- Host (Kate Leinbaugh): Microsoft, meanwhile, was building out its own AI business and focusing on a wide variety of clients. Last March, the company spent millions to hire most of the staff from an OpenAI competitor.
--:-- Guest (Tom Doton): The best bromance in tech was cooling.
--:-- Host (Kate Leinbaugh): This all came to a head late last year when OpenAI and Microsoft took a closer look at their exclusivity agreement.
--:-- Guest (Tom Doton): So over the last couple of months of 2024, they were in talks to renegotiate their contract.
--:-- Host (Kate Leinbaugh): And OpenAI kind of, it would reopen this, you know, perpetual can of worms of, are they getting enough for Microsoft?
--:-- Guest (Tom Doton): Earlier this month, Microsoft said it will invest $80 billion to build out AI-related infrastructure this fiscal year. An investment that isn't just for OpenAI.
--:-- Host (Kate Leinbaugh): And this fraying relationship was the backdrop to last week's White House announcement.
--:-- Guest (Tom Doton): That's next.
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--:-- Host (Kate Leinbaugh): Thank you. Nice to see you. Some very familiar faces.
--:-- Host (Kate Leinbaugh): On his first full day back in the White House last week, President Trump held that press conference with Sam Altman and the CEOs of Oracle and SoftBank.
--:-- Host (Kate Leinbaugh): Together, these world-leading technology giants are announcing the formation of Stargate. So put that name down in your books because I think you're going to hear a lot about it in the future.
--:-- Guest (President Trump): A new American company that will invest $500 billion at least. And this Stargate project is to build data centers, period. That's its mandate.
--:-- Host (Kate Leinbaugh): Yeah, yeah, basically to build multiple data centers. And there's a lot of vagueness right now, But, you know, there's also the infrastructure around the data centers, like bringing, you know, piping in the power that allow these things to work.
--:-- Guest (President Trump): I assume that's also going to be part of the cost. But it's all in service, yes, of these data centers. And it will be used exclusively by OpenAI. Yep. Single customer.
--:-- Host (Kate Leinbaugh): Stargate backers say they have $100 billion already and that its first data center began construction last year in Texas.
--:-- Guest (President Trump): The companies didn't disclose how much each partner would contribute.
--:-- Host (Kate Leinbaugh): Why was this private enterprise project announced at the White House?
--:-- Guest (Tom Doton): It was announced at the White House because they wanted to announce it as close as possible to the beginning of Trump's administration.
--:-- Host (Kate Leinbaugh): And you saw Ellison and Masayoshi Son and Altman all individually and specifically giving Trump and the administration credit for this being able to happen.
--:-- Guest (Tom Doton): We wouldn't have been able to do it without you, Trump, was kind of the theme of this whole thing.
--:-- Host (Kate Leinbaugh): I think there's a lot of regulation that still needs to be ironed out when it comes to AI. And I think all these companies want to have a hand in writing that regulation.
--:-- Guest (Tom Doton): And the closer you can get to Trump and, you know, kind of butter him up is like a good move for them.
--:-- Host (Kate Leinbaugh): But in Trump's orbit, very close to Trump, is a tech entrepreneur who's in an open war with Sam Altman?
--:-- Guest (Tom Doton): Yeah, I don't know who you're talking about there. I think his name is Elon Musk.
--:-- Host (Kate Leinbaugh): Oh, yeah, that guy. Elon Musk was a co-founder and early investor in OpenAI, but has been critical of how Altman's been running the company.
--:-- Guest (Tom Doton): Last year, Musk sued Altman, OpenAI, and Microsoft for alleged antitrust violations.
--:-- Host (Kate Leinbaugh): An OpenAI spokesperson has called the suit baseless and overreaching. Microsoft hasn't commented on the case.
--:-- Guest (Tom Doton): And in the hours after the Stargate announcement, Musk posted on X that, quote, they don't actually have the money.
--:-- Host (Kate Leinbaugh): Altman replied that Musk's assertion was wrong. Then Altman took a swipe at Musk, saying, quote, I realize what is great for the country isn't always what's optimal for your companies.
--:-- Guest (Tom Doton): Where was Microsoft in all of this Stargate Twitter drama?
--:-- Host (Kate Leinbaugh): It's so funny to me because sometimes as a reporter, you work really hard to find sources familiar with the matter to let you know what these guys are really thinking. And sometimes they just tweet it out.
--:-- Guest (Tom Doton): And that's kind of what we're getting here. So a few hours after the Stargate announcement, Satya was asked about it on a TV interview.
--:-- Host (Kate Leinbaugh): And his line was basically like, look, this $100 billion thing, I don't really know about that. All I know is the $80 billion that we have pledged for our AI infrastructure, I'm good for my $80 billion.
--:-- Guest (Tom Doton): Look, all I know is I'm good for my $80 billion.
--:-- Host (Kate Leinbaugh): I think it's a fair interpretation.
--:-- Guest (Tom Doton): And again, it gets even messier because Elon has been hate tweeting or hate posting about Stargate.
--:-- Host (Kate Leinbaugh): And in one of them, Satya responds with the crying, laughing emoji and basically says, we're not here just to hype up AI. We're here to build software and products that actually benefit people and make their lives better.
--:-- Guest (Tom Doton): And it's hard not to see that again as at least a little bit of a shot at Sam, who is kind of getting labeled as sort of a hype man when it comes to AI.
--:-- Host (Kate Leinbaugh): And so, yeah, it seemed like in that particular exchange, both Elon and Satya were kind of on the same side and sort of clowning on Sam.
--:-- Guest (Tom Doton): Here was OpenAI's sugar daddy turning on him publicly.
--:-- Host (Kate Leinbaugh): And there was more. Around the same time Altman was at the White House Microsoft was publishing a blog post that said the company relationship with OpenAI had evolved.
--:-- Guest (Tom Doton): The agreement was that basically OpenAI will continue to come to Microsoft when they have requests for more data center capacity.
--:-- Host (Kate Leinbaugh): The difference is that now, if Microsoft decides it doesn't want to build the new capacity that OpenAI is requesting, OpenAI is now allowed to take that request elsewhere.
--:-- Guest (Tom Doton): They're opening up their relationship.
--:-- Host (Kate Leinbaugh): Yes, it is an open relationship now, more so than it's really ever been.
--:-- Guest (Tom Doton): Polyamory? Sure. If that's the direction you want to go with it, then yeah, I think you could say these guys are in some sort of a poly situation.
--:-- Host (Kate Leinbaugh): Microsoft says it continues to be OpenAI's primary partner.
--:-- Guest (Tom Doton): And today, Altman tweeted a picture of him and Nadella, saying the next phase of their partnership is, quote, going to be much better than anyone is ready for.
--:-- Host (Kate Leinbaugh): How important is Stargate to OpenAI's future?
--:-- Guest (Tom Doton): I mean, I think really important. I think they weren't getting what they needed from Microsoft.
--:-- Host (Kate Leinbaugh): Microsoft was not building data centers at the speed and rate that they wanted.
--:-- Guest (Tom Doton): And so they needed to take matters into their own hands.
--:-- Host (Kate Leinbaugh): And if they kind of have way more control over the construction of these data centers, then, yeah, I think it's like, I think it's essential to that vision.
--:-- Guest (Tom Doton): Open AI has said it needs bigger and bigger data centers to run its models.
--:-- Host (Kate Leinbaugh): But this week, that notion was challenged by a company in China called DeepSeek.
--:-- Guest (Tom Doton): DeepSeek said it had created an AI comparable to OpenAI's without using any of the incredibly expensive chips that OpenAI relies on.
--:-- Host (Kate Leinbaugh): In a post yesterday, Altman called DeepSeek's model impressive and said it's, quote, invigorating to have a new competitor.
--:-- Guest (Tom Doton): So in thinking about the Stargate project, what does Microsoft's role, or lack thereof, say about the overall state of AI?
--:-- Host (Kate Leinbaugh): Well, I guess things have grown a lot since, you know, Microsoft and OpenAI first began their relationship.
--:-- Guest (Tom Doton): And the level of resources that a company like OpenAI needs is kind of at like an unprecedented level or like just a hard to predict level than it probably was in like 2019.
--:-- Host (Kate Leinbaugh): So I think as far as that goes, it's a recognition that we're in a totally different era when it comes to the amount of resources and money that it takes to build these sort of things.
--:-- Guest (Tom Doton): I think what's interesting that Satya brought up in a TV interview is that there's a bit of a divergence between these two companies in terms of their priorities and ambitions.
--:-- Host (Kate Leinbaugh): Because OpenAI is out there trying to build what they call artificial general intelligence or an AI that has the same level of smarts and capabilities as a human.
--:-- Guest (Tom Doton): And that's not really Microsoft's goal at all.
--:-- Host (Kate Leinbaugh): They want to build software and AI that can help people create Word documents faster and Excel spreadsheets and write marketing emails and make you a more efficient worker.
--:-- Guest (Tom Doton): And the more that OpenAI, you know, consumes these sort of resources and is trying to build models at this enormous scale, Microsoft is kind of diverging from that because they're out there to, like, get a return on their investment.
--:-- Host (Kate Leinbaugh): Like, they need to make real revenue from this.
--:-- Guest (Tom Doton): Do you see these two partners splitting up in the future?
--:-- Host (Kate Leinbaugh): Yeah, it's too soon to make that call and I think it depends on what splitting up really means.
--:-- Guest (Tom Doton): And I would find it hard to believe that there is a future where Microsoft and OpenAI are just like on non-speaking terms, that they're just, you know, in completely different worlds.
--:-- Host (Kate Leinbaugh): And there's so much about what Microsoft does right now in terms of the software they build that is rely on an OpenAI software.
--:-- Guest (Tom Doton): They're just too like, there's too much history in that relationship, you know.
--:-- Host (Kate Leinbaugh): News Corp, owner of The Wall Street Journal, has a content licensing partnership with OpenAI.
--:-- Host (Kate Leinbaugh): That's all for today, Tuesday, January 28th. The Journal is a co-production of Spotify and The Wall Street Journal. Additional reporting in this episode by Deepa Sitharama. Thanks for listening. See you tomorrow. Thank you.
