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OpenAI And Microsoft Make Up And Make Nice?
00:20:26
OpenAI and Microsoft say they have ironed out their differences… tentatively. Not officially. I’ll explain why that is interesting. With new FDA clearance for the Apple watch are millions of people about to discover they have hypertension? What if AI is less corrupt than humans? And, of course, the Weekend Longreads Suggestions.
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Welcome to the Tech Brew Ride home for Friday, September 12, 2025. I'm Brian McCullough. Today OpenAI and Microsoft say they have ironed out their differences tentatively, not officially. I'll explain why that is interesting with new FDA clearance for the Apple Watch, are millions of people about to discover they have hypertension? What if AI is less corrupt than humans? And of course, the weekend long Read suggestions Here's what you missed today in the world of tech. Well, has everything been sorted out? OpenAI and Microsoft say they have signed a non binding memorandum of understanding for the next phase of their partnership and are working to finalize the terms. Sources say that clause that rescinds Microsoft's access to OpenAI's most powerful tech if OpenAI develops artificial general intelligence remains part of this new deal, but it has been modified. Also as part of this OpenAI says its nonprofit parent will continue to have oversight over the company and will own an equity stake of more than $100 billion. Quoting Axios OpenAI and Microsoft have reached preliminary terms on a revised partnership deal that clears a path for the maker of ChatGPT to restructure itself, the two companies said Thursday. OpenAI and Microsoft have signed a non binding memorandum of understanding for the next phase of our partnership, the two companies said in a joint statement. We are actively to finalize contractual terms in a definitive agreement. Together we remain focused on delivering the best AI tools for everyone, grounded in our shared commitment to safety, end quote in the Microsoft OpenAI negotiations, both sides appeared to have gotten enough of what they wanted to move forward. According to sources, Microsoft wanted to lock down continued access to OpenAI's technology and products. OpenAI wanted the freedom to move forward with its restructuring needs and to look beyond Microsoft for cloud providers. End quote and quoting the New York Times, OpenAI said on Thursday that it was giving an equity stake worth at least $100 billion to the nonprofit that controls the organization and has reached a tentative deal to settle financial issues with its partner Microsoft. Both moves were considered essential steps that would allow OpenAI to go ahead with a plan to restructure itself, shifting from being managed by a nonprofit to becoming a public benefit corporation. One of the biggest impediments to changing OpenAI's structure has been Microsoft's investments. Between 2019 and 2023, Microsoft invested more than 13 billion dol OpenAI, which gave the tech giant roughly 49% of OpenAI's future profits. Microsoft has been reluctant to change its agreement with OpenAI without receiving ample compensation as part of their new deal Microsoft and OpenAI have renegotiated the financial terms of a commercial agreement they signed in 2019. The deal includes how the two companies share technology and how they share revenue from those technologies. The original agreement also included a clause that rescinded Microsoft's access to OpenAI's most powerful technology when the OpenAI board formally decided that the technology had achieved artificial general intelligence, or AGI, shorthand for a machine that matches the power of the human brain. This clause remains part of the new agreement, but has been modified, according to a person familiar with the agreement, who spoke on the condition of anonymity because the person was not authorized to discuss it. The nonprofit that now manages OpenAI would become, quote, one of the most well resourced philanthropic organizations in the world, Brett Taylor, OpenAI's board chair, said in a blog post. The nonprofit stake will exceed 20% of the reorgan company, according to the person familiar with the deal. End quote. Now quoting M.G. siegler, who has been all over this from the beginning. It's settled then. Of course it's not actually, or it would be finalized, but there's clearly some reason they'd like us to know they're working on it. Experience and common sense suggest they're trying to get ahead of something, and in fact there are a lot of tangential stories floating around out there that could explain the announcement. The biggest one is probably the two key states involved in the matter of OpenAI shifting to a public benefit corporation. Delaware, where OpenAI is incorporated, and California, where OpenAI resides, are clearly not happy about the recent news around the company being tied to recent tragedies as ChatGPT at best didn't help vulnerable users who seem to be in bad mental states of mind before taking their own lives and in one case the lives of others. This narrative has been simmering for some time and now it's boiling over, with the state AGs specifically suggesting the move away from nonprofit status may not be the right decision. This is a big enough problem that there are now whispers of the company debating shifting their domicile elsewhere, which OpenAI has denied and mixed with their main benefactor Microsoft, also apparently blocking the transition, not to mention their original backer and co founder Elon Musk trying to consistently throw wrenches into the process. And you have, well, an S show. Alleviating the Microsoft portion of the situation is an important step, but not the only one here. But it should help the company continue to make the case for the PBC transition, which they had hoped would happen this year, but reportedly was pushed into next year because of the impasse with Microsoft. Again, that impasse is now being cleared. Well, they're working on it. To me, that suggests OpenAI is very much trying to make this happen this year still. And yes, contractually, they're incentivized to do this because, as has been widely reported, OpenAI's new big benefactor, SoftBank, had the right not to fund the remainder of their portion of the $40 billion fundraise if the company didn't transition by the end of now. There's Almost no way SoftBank was going to back out of that agreement. Regardless, they're buying up secondary shares right now at $500 billion, which is significantly higher than the shares they're buying in the primary transaction. They'd be crazy not to take the automatic markup of their money, which they can still invest at $300 billion. But we're two in the weeds now. The key is that solving this Microsoft situation was perhaps the main element in trying to get a transition done anytime soon, even without the SoftBank deal pressure. The pressure from those states far more acute. One imagines that OpenAI wants to get this done quickly before they're sucked into endless political hearing about AI's role in the mental health crisis, which is apparently about to happen. If that's true, one has to wonder what OpenAI conceded to Microsoft here to get them on board fast. Again, they're not saying because they're still negotiating, but clearly a big part of it is the clause that is the stipulation in the original contract that Microsoft would lose access to OpenAI's technology if the company achieved AGI. It's decidedly more complicated than including in the who gets to decide what constitutes AGI, namely, OpenAI's board, which is now a totally different board composed of people with completely different backgrounds than the one that was supposed to be determining that and if Microsoft retained access to older AI technology. But the high level was clearly a problem for Microsoft. The clause remains, but it's modified. And my guess would be that it's modified such that Microsoft is also now free to pursue AGI itself and or superintelligence and anything else they wish to do. I'm also guessing they'll also retain some form of access to OpenAI's technologies beyond 2030, the other aspect of the contract Microsoft had reportedly wanted to change. Again, Microsoft seemingly holds the cards here, with the sign off sword in hand and with all the other issues swirling around OpenAI at the same time, another big holdup in any agreement between OpenAI and Microsoft was said to be the future equity stake in the event of a conversion. Because of the nonprofit status, Microsoft alongside all other investors just technically hold rights to future profits. At the moment, those will convert to actual equity with the PBC switch, but it wasn't tenable for Microsoft to hold the same 49% they hold in those profit rights. And it's actually more than that as it starts higher, closer to 75% to start up until a certain amount now, Microsoft's equity will stand at 33%, the nonprofit at 25% and SoftBank at 12%. That nicely adds up to 70%. But there are many other stakeholders around the table to convert here, most notably Khosla Ventures and the other original investors alongside Microsoft and then Thrive Capital, who has led a few of the later rounds and many, many others. And none of that includes equity for Altman, who famously holds none at the moment. And that has always been presumed to change with a conversion, but it can't be a massive percentage as we're running out of room fast. Oh yes, and what about that co founder who put up the money to start the whole thing? He remains another big wrinkle here, because he's undoubtedly going to argue that his grants to a nonprofit should be considered investments for equity if OpenAI is allowed to convert, which he'd still prefer not happen, as it makes life easier for his new AI startup competing with OpenAI XAI. That is a total wildcard here. Imagine if A judge says OpenAI has to give Elon Musk an equity slug. Regardless, he's seemingly about to get very vocal as OpenAI is clearly accelerating towards the PBC conversion. End quote.
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Learn more@WhatsApp.com Apple has gotten FDA clearance for hypertension alerts on Apple Watch and plans to roll out the feature to Series 11, 10 and 9 and watch Ultra 3 and 2 models next week. Which means you might be about to find out you've got hypertension. Quoting 9to5Mac when Apple announced the new Apple Watch Series 11 and Apple Watch Ultra 3 this week, it unveiled its latest health feature, Hypertension Notifications. At the time, the company said it expected clearance from the Food and Drug Administration in the United States soon. As of Thursday night, that clearance has officially been granted and the Hypertension Notifications feature is set to launch next week. Apple says that Hypertension Notifications will be available in more than 150 countries and regions around the world world at launch next week, including the us, eu, Hong Kong and New Zealand. Here's how Apple describes the feature. Hypertension notifications on Apple Watch use data from the optical heart sensor to analyze how a user's blood vessels respond to the beats of the heart. The algorithm works passively in the background, reviewing data over 30 day periods and will notify users if it detects consistent signs of hypertension. These notifications provide users with valuable insights into their health as it relates to this widespread condition simply by wearing their Apple Watch so they can begin making potentially life saving behavioral changes or start treatment to reduce their risk of serious long term health events. Apple says its new Hypertension Notification feature could alert nearly half of users with high blood pressure, including an even greater share of those with more severe stage 2 hypertension. The feature runs passively in the background on Apple Watch, rather than acting as a formal screening tool. And Apple emphasizes that not everyone with hypertension will receive a notification. In testing, the feature reached 95.3% specificity in the normal category, meaning many people flagged without full hypertension still showed elevated readings. Apple says this helps raise awareness and encourages proactive conversations with doctors about long term risks like heart disease, stroke and kidney issues. Apple says it expects the feature to notify over 1 million people with undiagnosed hypertension within the first year, End quote well, this is the most interesting AI story I've run across in a while. The country of Albania has appointed an AI bot named D? Ella as the minister responsible for managing and awarding all public procurement tenders in order to combat corruption. Quoting Reuters, Prime Minister Edi Rama, who is about to begin his fourth term, said on Thursday that Diella, which means son in Albanian, will manage and award all public tenders in which the government contracts private companies for various projects. Diella is the first cabinet member who isn't physically present but is virtually created by AI, Rama said during a speech unveiling his new cabinet. She will help make Albania, quote, a country where public tenders are 100% free of corruption, end quote. The awarding of such contracts has long been a source of corruption scandals in Albania, a Balkan country that experts say is a hub for gangs seeking to launder their money from trafficking drugs and weapons across the world and where graft has reached the corridors of power. That image has complicated Albania's ascension to the European Union, which Rama wants to achieve by 2030 but which political analysts say is ambitious. The government did not provide details of what human oversight there might be for Diella or address risks that someone could manipulate the artificial intelligence spot Dialla, originally launched early this year as an AI powered virtual assistant on the E Albania platform, helping citizens and businesses obtain state documents. Dressed in traditional Albanian attire, she provides assistance through voice commands and issues documents with electronic stamps, reducing bureaucratic delays. Not everyone is convinced. One Facebook user said even Diella will be corrupted in Albania. Another said stealing will continue and Diella will be blamed. End quote. Yeah, but I guess the theory or the analogy here is that you know how they always say on aggregate AI self driving cars are safer than humans? I guess if on aggregate AI is less corrupt than humans, then there you go. Well, speaking of whether or not AI is better or not better than humans, in the weekend long read suggestions this week, the Financial Times takes a at how AlphaFold 2 and the rise of generative AI has kickstarted what they're calling a new AI discovery boom, even though up until now, AIs not been really that great at drug discovery, apparently. In the mid 2010s, a wave of startups promised to use artificial intelligence to reinvent drug discovery, slashing the decade long timeline and the $2 billion price tag it usually takes to develop a medicine. Pharmaceutical giants such as Sanofi and Bristol Myers Squibb signed multi billion dollar partnerships while investors poured billions into the sector. A decade later, skeptics are asking, where are the drugs? Few AI designed candidates have advanced to late stage trials, and none have been approved. Companies such as Benevolent AI collapsed financially, while others, like Existentia, were acquired at a fraction of their peak valuations. The problem, insiders admit, is biology's staggering complexity. While AI excels at pattern recognition and molecule matching, predicting toxicity side effects or how a drug interacts with the human body remains far harder. As Daphne Kohler of Incitro notes, unlike software or games, where bits meet bits, drug discovery is where bits meet atoms. Still, the optimism persists. Breakthroughs such as DeepMind's AlphaFold 2 and the rise of generative AI since ChatGPT's launch have renewed hopes that better tools and richer datasets will deliver results. Veteran chemists caution patients, though drug discovery is probably the hardest thing mankind tries to do. For believers, the golden eggs may simply take longer to hatch. And lastly, also from the ft, you know how the use case for AI agents is always hey, send this thing out and it'll book your whole vacation for you, right? Well, the likes of Booking.com, expedia, Airbnb and others are not waiting around for the AI agent overlords to take them over. Booking.com and Expedia have integrated OpenAI's models into new trip planners and automated tools, while Airbnb has rolled out an AI powered customer service agent plans to expand agentic features next year. These moves come as anthropic Google and OpenAI debut autonomous travel bots that could reshape the $1.6 trillion travel industry, undermining online travel agencies. Commission driven business model. Hotels, long resentful of the 15 to 20% booking fees, see potential relief from those fees but warn AI could create new dependencies. Investors remain cautious. Airbnb shares are down 6% this year, and Expedia and Booking have lagged the wider tech market, executives counter. Remember that their data, customer support and proprietary networks provide defensible value. Though bookings, Glenn Fogel admits the risk is real. You're always worried you're going to fall off the map, he said, end quote. On the weekend bonus episode this weekend, I've got a great talk with John Borthwick, founder and head Muckety Muck over at the great startup studio Betaworks. Enjoy. Talk to you on Monday.