It looks like a partnership. It acts like a dependency. In reality, it is a slow-motion acquisition.
Inspiration: Satya Nadella’s calm demeanor during the OpenAI coup, and the old Microsoft playbook: “Embrace, Extend, Extinguish.”
November 2023. The Board fires Sam Altman. Chaos ensues.
Satya Nadella didn’t panic. He didn’t issue a press release condemning the board. He simply offered to hire everyone.
In that moment, the curtain fell. The world realized OpenAI wasn’t an independent company. It was a vassal state of Microsoft.
Without Azure credits, OpenAI effectively ceases to exist in weeks. Sam came back, but the power dynamic shifted forever. Microsoft isn’t just an investor; they are the landlord, and OpenAI is behind on rent.
The “Gemini 3” Code Red
Google just dropped Gemini 3. It’s faster, cheaper, and native.
Reports indicate a “Code Red” at OpenAI. Their moat—being the smartest model in the room—is gone.
But look at the integration gap.
Google: Gemini is seamlessly integrated into Workspace. It feels like one product. You open Docs, and the agent is there.
Microsoft: OpenAI is not seamlessly integrated into Office. Microsoft built Copilot—a separate brand, wrapping OpenAI’s models but keeping the credit.
Microsoft could have made ChatGPT the default interface for Windows and Office. They didn’t. They kept ChatGPT isolated while building their own “Copilot” brand equity. They are using OpenAI’s engine to power their car, not Sam’s.
The “Let Them Starve” Strategy
Why doesn’t Microsoft go “all in” to save OpenAI’s dominance? Because they are competitors.
Microsoft is actively diversifying.
They invested in Mistral (France).
They hired the founders of Inflection AI to build in-house models (MAI-1).
Here is the calculus:
If OpenAI wins, Microsoft wins (they own 49% of the profits).
If OpenAI fails (runs out of cash or loses to Gemini), Microsoft wins bigger.
Why? Because if OpenAI’s valuation collapses, Microsoft can acquire the entire company (and full control) for pennies on the dollar. Or, as Nadella famously implied, they already have the rights to the IP and weights.
Conclusion: “Embrace, Extend, Extinguish” 2.0
OpenAI thinks they are the protagonist of the AI story. They are actually just the R&D department for Redmond.
My Prediction: Microsoft won’t save OpenAI from Google. They will let OpenAI bleed until they are weak enough to be fully absorbed.
The Lesson: Never build your castle on someone else’s cloud.
