Microsoft to Exit OpenAI Partnership, Plans Major Layoffs Amid AI Push

Seattle, WA — Microsoft is poised to walk away from its high-profile partnership with OpenAI, the developer behind ChatGPT, as negotiations falter over critical terms, including Microsoft’s future equity stake in the AI startup, sources familiar with the matter told the Financial Times.
The tech giant, a dominant player in artificial intelligence, plans to continue leveraging OpenAI’s technology through existing commercial agreements until 2030, according to the Financial Times. However, a breakdown in talks could reshape the AI landscape, given Microsoft’s multibillion-dollar investment in OpenAI, which has been pivotal to its leadership in the sector.
Tensions have escalated, with OpenAI executives reportedly considering accusations of anti-competitive behavior by Microsoft, per a June 16 Wall Street Journal report. The two parties are exploring revisions to Microsoft’s investment terms, including its potential share in OpenAI, which is transitioning to a nonprofit structure to facilitate fundraising—a move requiring Microsoft’s approval as its primary backer.
In a parallel move, Microsoft is bracing for significant layoffs, targeting thousands of employees, particularly in its sales division, Bloomberg reported, citing insiders. The cuts follow a prior reduction of approximately 6,000 jobs in May and are part of Microsoft’s broader strategy to streamline operations while funneling resources into AI development. The company plans to invest $80 billion this fiscal year, largely to expand data centers and address capacity constraints for AI services, as industries race to integrate AI for competitive advantage.
The layoffs, expected to be announced early next month at the close of Microsoft’s fiscal year, may extend beyond sales, though the timeline could shift, sources noted. As of June 2024, Microsoft employed 228,000 workers globally.
The pivot comes as competitors like Amazon signal workforce reductions tied to generative AI and intelligent agents, with CEO Andy Jassy projecting a leaner headcount in the years ahead.
Microsoft’s strategic recalibration underscores the high stakes of AI innovation, as the tech giant balances partnerships, investments, and workforce restructuring to maintain its edge in a rapidly evolving market.