Heated Tensions Rising Between OpenAI & Microsoft

For years, OpenAI and Microsoft have walked side by side: big money, big compute, and even bigger ambitions. But recently, the trust between them has started to erode, with signs visible for anyone willing to look past the polished announcements.

TechCrunch 16 June 2025 reports that OpenAI has become increasingly wary of Microsoft’s deep hold over its infrastructure and its influence on product direction. What began as a partnership is becoming something closer to a negotiation over power. OpenAI’s move to transition to a public-benefit corporation and eye a future IPO only adds to the tension, with Microsoft’s near-half stake a sticking point.

In the background, OpenAI has started to hedge its bets. The most symbolic gesture: a landmark deal with Google to run some of its workloads on Google Cloud. As Reuters 10 June 2025 points out, this is not just a technical choice. It is a signal. OpenAI wants options, and wants to be seen as something more than just a Microsoft asset.

Perhaps the most notable shift has been OpenAI’s deepening embrace of the US government. This month, the company launched OpenAI for Government, a suite of services aimed at public sector work, and was swiftly awarded a $200 million contract from the Department of Defense (CNBC, 16 June 2025). The contract focuses on building AI prototypes for administrative tasks, logistics, and cybersecurity within the federal government. It is not about autonomous weapons or battlefield AI.

Running alongside these changes is Project Stargate, a public-private initiative backed by OpenAI, SoftBank, Oracle, and others, with ambitions to build out a massive network of data centres across the US. This is an AI infrastructure play that could total $500 billion over several years. As Business Insider June 2025 and others have noted, Stargate is not a secretive military project. Rather, it is a move to ensure the US has the data and compute backbone to compete globally.

This government pivot comes just as another storyline makes headlines: the Musk–Trump fallout. Leaked texts and public spats have turned the air sour between Elon Musk and Donald Trump. Musk, once a guiding influence at OpenAI, has become a vocal critic, questioning the wisdom and transparency of Stargate, and positioning his own company, xAI, as an alternative. His split from both OpenAI and certain political backers now stands as a fault line in the industry.

OpenAI’s direction is clear. The partnership with Microsoft is tense and evolving. Relationships with Google are no longer unthinkable. The company is becoming a major player in the public sector, threading its influence through both government contracts and grand infrastructure projects. Some see this as a natural progression, others as a sign of compromise. But one thing is certain: OpenAI is no longer a plucky outsider. It is an institution in the making, learning to move between the towers of Silicon Valley and the corridors of Washington.