Microsoft is prepared to walk away from high-stakes negotiations with OpenAI over the future of its multibillion-dollar alliance, as the ChatGPT maker seeks to convert into a for-profit company.

The software giant has considered halting complex discussions with the $300bn AI start-up if the two sides remain unable to agree on critical issues, such as the size of Microsoft’s future stake in OpenAI, according to people with knowledge of its plans.

In this eventuality, Microsoft would rely on its existing commercial contract to retain access to OpenAI’s technology until 2030, unless there was an offer that was equal to or better than its current arrangements, according to these people.

These people stressed, however, that Microsoft was operating in “good faith” and both parties were meeting daily to try to put a plan on the table and were hopeful a deal could be reached.

“We have a long-term, productive partnership that has delivered amazing AI tools for everyone,” Microsoft and OpenAI said in a joint statement. “Talks are ongoing and we are optimistic we will continue to build together for years to come.”

OpenAI needs a deal with Microsoft to complete a move away from its non-profit origins into a more conventional corporate structure, which it believes will unlock funding and launch an initial public offering.

Microsoft must approve the switch by the end of the year or OpenAI risks losing billions of funding from other investors, including SoftBank.

In discussions over the past year, the two sides have battled over how much equity in the restructured group Microsoft should receive in exchange for the more than $13bn it has invested in OpenAI to date. Discussions over the stake have ranged from 20 per cent to 49 per cent.

The pair are also revising the terms of its wider contract, first drafted when Microsoft invested $1bn into OpenAI in 2019. 

Under its current arrangement, Microsoft has exclusive rights to sell access to OpenAI’s models and receives a 20 per cent share of revenues up to $92bn.

Microsoft is reluctant to give ground on its continued access to OpenAI’s technology or its share of the group’s revenues, according to multiple people close to the discussions.

The Wall Street Journal reported this week that OpenAI had considered a “nuclear option” of accusing Microsoft of anti-competitive behaviour over its partnership.

“Holding out is Microsoft’s nuclear option . . . and they are just making OpenAI sweat,” said one person close to OpenAI, who also argued access to the ChatGPT maker’s IP was necessary for Microsoft to maintain its position in the race to commercialise AI against rivals such as Google and Meta.

One person close to Microsoft said the “status quo” was acceptable for the Big Tech company and that it was “happy with the current contract” and prepared to “run it through” until 2030. 

“The market cares about how much revenue Microsoft is making . . . not about how much equity it owns in OpenAI, [and] this deal moves revenue away from Microsoft,” said another person who has discussed the negotiations with Microsoft executives.

“The question is, what does Microsoft get in return for giving up the right to that revenue?”

Microsoft has already begun diversifying away from OpenAI models in recent months, as part of chief executive Satya Nadella’s belief that leading models will become “commoditised” — or have less value than being able to sell AI-enabled applications and digital assistants built on top of them.

In May, the software giant made Elon Musk’s xAI model Grok available to its cloud computing customers.

“OpenAI is not necessarily the frontrunner anymore,” said one person close to Microsoft, remarking on the competition between rival AI model makers.

Several other elements of the current contract are also up for negotiation, including Microsoft’s exclusive rights to sell OpenAI’s software through its Azure cloud computing service; its right of first refusal to provide computing infrastructure to OpenAI; and the software giant’s access to the AI group’s intellectual property before it reaches “artificial general intelligence”.

The latter clause refers to a point where OpenAI creates a “highly autonomous system that outperforms humans at most economically valuable work” and is likely to be dropped, as the Financial Times previously reported.

OpenAI’s chief executive Sam Altman and its chief financial officer Sarah Friar have also said the company is struggling to access the computing power needed to run ChatGPT, which has raced to 500mn weekly active users worldwide, while also training new models and launching products. 

Two former Microsoft executives involved in managing OpenAI’s compute requirements said the relationship between the groups had frayed significantly over the issue, particularly around Altman’s demands for faster access to even more infrastructure.

Even if the issues are resolved, the transaction will have to be approved by attorneys-general in Delaware and California. The conversion is also subject to a legal challenge from xAI chief Musk, which has been supported by former OpenAI employees.

For OpenAI, getting an agreement with Microsoft is crucial. Investors in the AI group’s past two financing rounds have agreed to provisions that require the company to successfully convert into a for-profit entity or their equity investment becomes debt.

Should this process be delayed or abandoned, investors have the option to claim some of their investment back. SoftBank, which led the most recent round, could cut its $30bn investment by $10bn if the conversion is not completed by the end of the year. People close to OpenAI are confident that investors would retain their commitments, even if the transaction was delayed.

A Silicon Valley veteran close to Microsoft said the software giant “knows that this is not their problem to figure this out, technically, it’s OpenAI’s problem to have the negotiation at all”.

Israel has been arming a criminal gang in the Gaza Strip as part of an effort to strengthen opposition to Hamas in the enclave, defense sources confirmed on Thursday following remarks on the matter by former defense minister Avigdor Liberman.

Liberman, who heads the opposition Yisrael Beytenu party, told the Kan public broadcaster on Thursday morning that Prime Minister Benjamin Netanyahu had unilaterally approved the transfer of weapons to the Abu Shabab clan, an armed gang or militia that is opposed to Hamas’s rule in the Gaza Strip.

“The Israeli government is giving weapons to a group of criminals and felons, identified with Islamic State, at the direction of the prime minister,” Liberman charged. “To my knowledge, this did not go through approval by the cabinet.”

He claimed that Shin Bet chief Ronen Bar was aware of the decision to arm the group, “but I don’t know how much the IDF chief of staff was in on it.”

The group in question, which is sometimes described as a militia and sometimes as a criminal gang, is led by Yasser Abu Shabab, a member of a large clan in southern Gaza. The have been linked in the past to smuggling operations with Egyptian Jihadist groups, but it was not immediately clear why Liberman branded them as linked to the Islamic State.

His gang has been documented in recent days operating in an area near the Kerem Shalom border crossing under Israeli military control.

In the footage, which was published online by Abu Shabab, members of the group can be seen wearing military-style uniforms with the Palestinian flag and the words “Counter-Terrorism Mechanism” emblazoned on them.

The Prime Minister’s Office, in response to Liberman’s comments, did not deny the allegations but said instead that Israel was “working to defeat Hamas through various means, based on the recommendations of all the heads of the security establishment.”

In a later statement, Prime Minister Benjamin Netanyahu confirmed the move.

In the latest installment in a series of short interviews with advisor Topaz Luk his office has posted in recent weeks, Netanyahu said that “in consultation with security officials, we made use of clans in Gaza that are opposed to Hamas.”

“What’s wrong with that?” he continued. “It’s only good. It saves lives of IDF soldiers.”

“It’s extremely serious,” Netanyahu said of Liberman revealing the move and predicting that it won’t be investigated. “Publicizing it only does good for Hamas.

Liberman’s accusation was later confirmed by defense officials who spoke on the condition of anonymity, and the details were cleared for publication by the Israeli military censor.

The sources confirmed that Israel has been arming the gang with Kalashnikov rifles, including some that were seized from Hamas during the ongoing war.

The decision to start arming the group was made without the approval of Israel’s security cabinet, forgoing normal procedure. It was instead led by Israeli security bodies, with Netanyahu’s approval, the defense sources said.

The militia has been operating in Rafah, in an area under Israeli military control. Abu Shabab has claimed to be securing the humanitarian aid convoys entering Israel through the southern border crossings, although others have accused his gang of looting them.

Targeted by Hamas

The clan has caught Hamas’s attention. On May 30, Hamas published an official video on May 30 showing a group of armed, masked men operating outside a building before being blown up.

The terror group claimed the group in the video was working with the IDF to inspect buildings before Israeli troops moved in, without specifying whether they were Israeli or Palestinian. However, online comparisons to previous images of Abu Shabab’s gang suggested it was the same group.

In a conversation with Lebanon’s Al-Akhbar newspaper earlier this week, anonymous Hamas sources shared more information about the group, which they admitted has been a thorn in their side.

According to the sources, the militia comprises some 300 people, of whom Abu Shabab personally recruited around 50. They alleged that the remaining 250 members were recruited through the Palestinian Authority’s intelligence service.

The Hamas sources did not offer proof of Abu Shabab’s alleged ties to the Ramallah-based PA, and Al-Akhbar did not verify any of the terror group’s claims.

The group emerged in Rafah in May 2024, following the IDF invasion of the Strip’s southernmost city, the Hamas sources said. They told Al-Akhbar that the Al-Qassam Brigades have “already started carrying out direct assassinations” against members of Abu Shabab’s gang, and that its continued existence has fast become a “central issue” for the terror group.

According to the sources, some members of the group belong to an extremist Salafi faction that had run-ins with Hamas prior to the war as well.

This is not the first time that Netanyahu has been involved in or accused of propping up burgeoning militias and terror groups to undermine a common enemy.

Various reports over the years have indicated that Israel’s policy under Netanyahu was to treat Hamas as an asset that could be used to weaken the Palestinian Authority.

The premier reportedly told a Likud faction meeting back in 2019 that anyone who opposed the establishment of a Palestinian state should support sending funds to Hamas, the enemy of the internationally recognized Palestinian Authority.

Finance Minister Bezalel Smotrich made a similar claim in an interview in 2015.

Amid the outrage generated by Liberman’s revelation on Thursday, the left-wing The Democrats leader Yair Golan pointed out the pattern of behavior.

“Netanyahu, who transferred billions to Hamas in suitcases full of cash, based on the incorrect belief that Hamas is an ‘asset,’ is now promoting a new dangerous concept: Arming a Gazan militia with ties to ISIS,” the politician wrote on X.

“Netanyahu is dangerous to Israel’s security,” he charged. “This is not a mistake. This is systematic. Netanyahu is selling Israel’s security for another day in office.”

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If you need a clearer example of how the Clintons are opportunist scumbags that will use race to get elected in one breath and throw minorities under the bus if they don't agree with their horrific world views.

Absolute shame that this show got canceled.

The difference between European countries and America is becoming so stark. Anyone reading or watching global news has to see how backwards this country is and that it’s only getting worse.

It’s about time that Intuit was called out for their scam. Hopefully, the attempt to stop the federal tax filing will get dismissed as well.