Satya Nadella isn’t hiding what Microsoft plans to do with OpenAI

Satya Nadella said something refreshingly blunt this week. Microsoft gets to resell OpenAI’s models to its Azure customers without paying licensing fees, and when asked what they plan to do with that arrangement, he didn’t dance around it.

“We fully plan to exploit it,” he said.

No corporate-speak. No “leverage synergies” or “create value for stakeholders.” Just exploit. That’s the word he chose, and I appreciate the honesty even if it sounds aggressive.

Here’s the deal Microsoft signed: OpenAI’s technology becomes available through Azure, and Microsoft doesn’t have to cut OpenAI in on the revenue. That’s a massive advantage over competitors who have to pay per API call or per model license. Google’s Vertex AI doesn’t get that deal. AWS Bedrock doesn’t get that deal. Only Microsoft does.

And Nadella knows exactly what that means. Azure can undercut every other cloud provider on AI pricing while still making healthy margins. Or they can offer better capabilities at the same price. Either way, Microsoft wins.

This is higher than I expected from the relationship. When Microsoft first invested in OpenAI, the narrative was about partnership and shared vision. But the more distance we get from that initial deal, the clearer it becomes that Microsoft structured everything to extract maximum value while OpenAI carries the R&D cost.

OpenAI gets compute credits and distribution. Microsoft gets the IP and the ability to monetize it however they want. That’s not a partnership of equals. That’s vendor financing with a very favorable repayment structure.

The timing matters too. OpenAI is burning through capital at a staggering rate trying to train bigger models and maintain its lead. They need Microsoft’s compute infrastructure more than Microsoft needs their latest model. That gives Redmond enormous leverage in any renegotiation.

I’ve seen this pattern before in tech. A larger company invests in a startup, gets preferential terms, then gradually tightens the screws. It happened with Cisco and its acquisitions. It happened with Google and Android. The partner company becomes dependent, and the larger company extracts more and more value over time.

Microsoft is doing the same thing here, but at least Nadella is upfront about it. Exploit is an ugly word in most contexts, but in business, it’s just describing what every company tries to do with its advantages. Most CEOs would say “maximize the opportunity” or “drive value.” Nadella said exploit.

I respect that. Even if I’m not sure OpenAI’s leadership is thrilled about hearing it.

The real question is what happens when OpenAI tries to diversify its cloud providers or build its own infrastructure. They’ve already started talking to other cloud vendors, but the dependency on Azure for training compute is deep. Breaking that would take years and billions of dollars.

For now, Microsoft holds the stronger hand, and Nadella is making sure everyone knows they plan to play it.