OpenAI And Microsoft Make Up And Make Nice? - Tech Brew Ride Home

Tech Brew Ride Home — Episode Summary

Episode Title: OpenAI And Microsoft Make Up And Make Nice?
Date: September 12, 2025
Host: Brian McCullough

Overview

This episode dives deep into the recent developments between OpenAI and Microsoft, focusing on the tentative resolution of their partnership issues amidst OpenAI's push to transition into a Public Benefit Corporation (PBC). The episode also covers major tech stories, including the FDA’s clearance of Apple Watch’s new hypertension alert feature, Albania’s appointment of an AI minister to combat corruption, reflections on AI's slow progress in drug discovery, and how the travel industry is preparing for AI disruption.

Key Discussion Points

1. OpenAI and Microsoft: A Tentative Truce

[00:04–09:24]

Non-binding MOU Signed:
OpenAI and Microsoft have reached a non-binding memorandum of understanding, which is a preliminary agreement to move forward with their partnership. The companies are still negotiating definitive terms.
- Quote (Joint Statement): “Together we remain focused on delivering the best AI tools for everyone, grounded in our shared commitment to safety.” [00:35]
The AGI Clause Modified, Not Removed:
The controversial contract clause that rescinds Microsoft’s access to OpenAI’s most powerful tech if AGI (artificial general intelligence) is developed remains, albeit modified.
- Brian summarizes: This clause, central to Microsoft’s concerns, was retained with changes that reportedly favor both parties’ interests.
OpenAI's Restructuring and Equity Stakes:
OpenAI seeks to shift from nonprofit to PBC, but Microsoft's prior investments complicated this. Previously, Microsoft was entitled to 49% of OpenAI’s future profits; now, their future equity will be 33%, with the OpenAI nonprofit holding 25%, and SoftBank 12%, rounding to 70% among the major players.
- Quote (Brett Taylor, OpenAI board chair): "The nonprofit stake will exceed 20% of the reorganized company… one of the most well-resourced philanthropic organizations in the world.”* [03:22]
Pressure from US States and Political Scrutiny:
Delaware and California state authorities expressed concerns about OpenAI’s shift to a PBC in light of recent tragic incidents involving ChatGPT’s use. Regulatory scrutiny and the potential for political hearings add urgency to OpenAI’s restructuring efforts.
- Quote (M.G. Siegler): “Imagine if a judge says OpenAI has to give Elon Musk an equity slug… He remains another big wrinkle here…” [08:30]
SoftBank's Role and Time Pressures:
SoftBank, a significant new funder, reportedly could withhold funding if the transition faltered this year—though this appears unlikely for financial reasons. Still, the time pressure is interpreted as acute, especially given mounting legislative and public scrutiny.
- Quote (M.G. Siegler): “SoftBank had the right not to fund… if the company didn’t transition by the end of now. There’s almost no way SoftBank was going to back out…” [06:30]
Unanswered Questions:
The specifics of the newly modified AGI clause and details about other investors’ stakes—especially original co-founder Elon Musk's claims—remain open and contentious.

2. Apple Watch’s FDA-Approved Hypertension Alerts

[11:18–12:20]

Feature Overview:
Apple received FDA clearance for its new hypertension notification feature, which will be rolled out to Series 9–11 and Ultra 2–3 watches.
- Monitors blood vessel responses and notifies users of sustained hypertension.
- Passive monitoring (not a diagnostic tool), but could alert over 1 million people with undiagnosed hypertension in the first year.
- 95.3% specificity in normal users; aims to prompt proactive health conversations.
Quote (Apple’s description):
“These notifications provide users with valuable insights into their health… simply by wearing their Apple Watch so they can begin making potentially life-saving behavioral changes or start treatment…” [11:50]

3. Albania Appoints an AI Minister to Fight Corruption

[12:21–13:30]

Diella, AI Minister:
Albania appointed an AI bot, Diella, as the new minister for public procurement, aiming to make all government contract tenders corruption-free.
- First "virtual" cabinet member.
- Diella, initially an e-gov assistant, now processes public tenders autonomously.
- Public skepticism lingers with concerns about manipulation.
Quote (Prime Minister Edi Rama):
“She will help make Albania a country where public tenders are 100% free of corruption.” [12:50]
Mixed Reactions:
Some citizens express doubt:
- Facebook user: “Even Diella will be corrupted in Albania.”
- Another: “Stealing will continue and Diella will be blamed.” [13:10]
Brian’s take:
Analogizes to AI in driverless cars—if AI is less corrupt than humans on average, that might be enough to deliver improvement.

4. AI’s Impact in Drug Discovery

[13:31–14:20]

Skeptical Reflection:
A decade of AI-fueled promises in drug discovery has yielded few late-stage candidates or approvals. Startups have collapsed or been acquired cheaply, largely due to the complexity of biology that outpaces AI’s capabilities.
- Quote (Daphne Kohler, Incitro): “Drug discovery is where bits meet atoms.” [13:50]
Renewed Optimism:
Recent advances (e.g., AlphaFold 2, generative AI) bring new hope, but veteran chemists warn that significant results may take many more years in this most difficult domain.

5. Travel Industry Braces for AI Disruption

[14:21–End]

In-House AI Innovations:
Major OTAs like Booking.com, Expedia, and Airbnb are rolling out their own AI-powered planning and customer service agents, integrating OpenAI’s models to avoid obsolescence.
Industry Response:
While AI agents threaten traditional booking fees, companies assert their data and networks offer defensible value. Still, there is palpable anxiety over tech disruption.
Quote (Glenn Fogel, Booking.com):
“You’re always worried you’re going to fall off the map.” [14:55]

Notable Quotes & Moments

“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.” — M.G. Siegler [05:10]
“Alleviating the Microsoft portion of the situation is an important step, but not the only one here.” — Brian McCullough [07:25]
“Not everyone with hypertension will receive a notification… This helps raise awareness and encourages proactive conversations." — Brian (quoting Apple) [12:05]
“The key is that solving this Microsoft situation was perhaps the main element in trying to get a transition done anytime soon…” — Brian [07:45]

Timestamps for Major Segments

00:04 — OpenAI and Microsoft: The state of the partnership
03:22 — OpenAI's PBC transition, AGI clause, and equity split
06:30 — SoftBank pressure and financial negotiations
08:30 — Potential legal claims from Elon Musk
11:18 — Apple Watch hypertension feature
12:21 — Albania’s AI minister Diella
13:31 — AI and drug discovery: optimism vs. skepticism
14:21 — AI disruption in the travel industry

Conclusion

This episode provides a succinct yet comprehensive update on major developments at the intersection of technology, business, and society. Whether it’s the tangled threads between OpenAI and Microsoft, the promise and pitfalls of AI in public policy, health, and travel, or the larger philosophical question of whether machines can really outperform humans, Brian and his sources distill the day’s key stories into need-to-know insights for listeners eager to stay at the tech water cooler.

Transcript

A (0:04)

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.