Microsoft is reportedly prepared to walk away from its high-stakes negotiations with OpenAI, the creator of ChatGPT, as the two companies struggle to resolve fundamental disagreements over the future of their multibillion-dollar alliance. The potential breakdown of this partnership could have far-reaching implications for the global AI race and the commercial strategies of both tech giants.

Microsoft’s relationship with OpenAI has been a cornerstone of the recent AI boom. Since 2019, Microsoft has invested more than $13 billion into OpenAI, securing early access to groundbreaking AI models and integrating them into its own products and services. However, the alliance has grown increasingly strained in recent months. At the heart of the dispute are critical issues such as the size of Microsoft’s future stake in OpenAI, the terms of access to next-generation AI technologies, and the control structure of OpenAI’s evolving corporate entity.

According to sources familiar with the matter, Microsoft is considering pausing or even abandoning ongoing talks if the two sides cannot reach an agreement that protects its interests. For now, Microsoft plans to rely on its existing commercial contract, which secures access to OpenAI’s technology until 2030. This fallback position signals that the tech giant is willing to ride out the current terms rather than accept unfavorable changes.

The negotiations have been further complicated by reports that OpenAI executives have considered accusing Microsoft of anticompetitive behavior throughout their partnership. OpenAI is reportedly seeking to loosen Microsoft’s grip on its intellectual property and computing resources, even as it needs Microsoft’s approval to complete its transition into a public-benefit corporation—a move seen as critical for future fundraising and a possible IPO.

The two companies are also locked in a standoff over OpenAI’s $3 billion acquisition of the AI coding startup Windsurf. OpenAI is determined to prevent Microsoft from gaining access to Windsurf’s intellectual property, which could significantly enhance Microsoft’s own AI offerings, such as GitHub Copilot.

For Microsoft, the partnership has been a strategic advantage, positioning it at the forefront of AI innovation and giving it a competitive edge over rivals like Google and Amazon. The company’s willingness to walk away from the talks signals confidence in its current contractual protections and a reluctance to cede further ground in negotiations.

OpenAI, meanwhile, is seeking greater independence as it transitions to a public-benefit corporation. The startup hopes that a revised deal will allow it to raise more capital, reduce revenue sharing with Microsoft, and maintain flexibility as it prepares for a potential public offering. However, without Microsoft’s approval, these ambitions could be delayed or derailed.