What's Next for OpenAI After Microsoft?

Opening I just stripped Microsoft's exclusive license and they uncapped their enterprise business and Microsoft's stock is paying for ahead of Wednesday's earning call but before that the AlphaGo guy raised $1.1 billion to skip LLM's entirely Elon Musk and Sam Altman have both walked into a courtroom in Oakland together and a German robotic startup has convinced BMW and PepsiCo that robots should think before they act.

Alright, first up we have a Suttgart-based startup called Secre Act. They just raised $110 million in a series B Round of Funding to build robots that simulate the consequences of their actions before they actually move.

This whole round was led by headline and they also had some participation from Bullhound, Daphne, they had Felix Kapital and then I think a bunch of their existing backers like Airstreet and Cretum.

They announced Sunday and the money funds to things in particular. Number one, they're opening a Boston office and they're scaling their Cortex 2.0 which they're calling kind of their robot brain.

This is what's interesting specifically about Cortex 2.0. It bolts a world model onto a vision language action stack.

So basically all of the robots that we have today, the AI can just see things and then it picks. Cortex 2 is going to think first before it sees and makes an action.

It runs possible actions through a learning model of physics and object behavior. So it's like looking at a stack of books and it's like if I move forward too fast and bump that over, this is what's going to happen.

If I move my arm to grab this book, this is what's going to happen. So it's like predicting what its actions will, you know, what course, what things will happen.

The physics that will happen after it makes a certain movement, which is really interesting in safety and in, you know, making sure that stock inside of warehouses isn't getting destroyed by robots.

They're really understanding the implications of their actions, which is very interesting.

And in addition to this, when it is looking and deciding what to do, it's going to pick basically the action that is most likely to work and then it's going to update in real time as the scene changes, right?

Because in a warehouse, when a robot sitting there looking at, you know, a stack of products to go grab and move or when it's looking at, you know, a car in a repair shop, it's not looking at a picture.

It's looking at a moving image, things are constantly moving. The CEO is rad guild and he was talking about this. He said, quote, we bet early that you can't build real robotics, AI in a lab, you build it with a data flywheel fed by real deployments, shipping into production, living with the failures.

So they've already done over a billion real production picks and they have a bunch of incredible customers, they have a BMW, dangler truck and also PepsiCo.

This is the same world model thesis, basically that Jeff Bezos's stealth AI lab is reportedly chasing. They have a $10 billion around Bloomberg just flagged it last week. I think we covered it already.

Anyways, robotics in 2026 is getting to be one of these really interesting areas and these world models.

I think are going to be a huge part of that. And just like as a one interesting thing because we've been talking about these world models for a while and I think a lot of people don't understand them.

But we have video companies like Runway that has allegedly been working on a world model. We have a ton of the kind of like the top people that there's a bunch of big people that left like opening eye and a thoroughfricate other places over the years to work on these world models.

And we don't hear about them a lot. So I'm really excited about this. We're starting to see the application. And I think as robotics gets bigger, these world models are going to come out of the woodwork and we're going to realize.

Oh my gosh, whatever they've been working on for the last, you know, five years is incredibly important and applicable to what we need for humanoid and other robots today.

Okay, another story is that David Silver, this is the guy who built AlphaGo Alpha Zero and Alpha Star at DeepMind. He just announced a record $1.1 billion seed round for his new startup, which is called ineffable intelligence.

The valuation on this is $5.1 billion. It is the largest seed round in European history. It was co led by Sequoia and light speed in video, DST index, Google and the UK sovereign AI fund. All of them were writing checks into this. So this is a massive round. Obviously he's an absolute legend in the industry.

Bloomberg's reporter will Mathis had the deal terms first was kind of reporting on this and essentially he says that the pitch is in the company's name. The CEO silver thinks that the most important part of intelligence is what he's calling ineffable, meaning you you literally can't capture them in language.

So LLM's which are kind of next token prediction models, right? These are instead of you know human text or something. He's saying that those are going to hit a ceiling and his bet is a different path entirely.

He's betting on a massive scale reinforcement learning agents that learn from their own experience world models and what he and Rich Sutton wrote up last year as the quote era of experience. Now this is really interesting because it's kind of a different direction altogether from Anthropic and Open AI right now.

And I mean you just heard earlier I was talking about a lot of these world models and the importance of them. So this is kind of it's interesting that we feel like in order to perhaps get to AGI or to get to the next level of AI.

We're going to have to move away from LLM's and possibly move into world models. Now this is a theory we're working with it. I mean we can see a ton of potential in this theory. So I actually have a lot of confidence in this.

But you know to this point Anthropic Open AI these are the models that have scaled the most they have the most users and they're kind of at the forefront. But I wouldn't be surprised if these world models start kind of kind of competing.

If I'm being honest I have some skin in this debate because when you actually build production apps on top of these models the limits of just kind of pure language pre training shows up pretty fast.

Pat Grady he works over at Sequoia and he put it in there he put a quote in their blog recently that I was like oh man that it's pretty pointed at this exact point he says language is a beautiful compression of the world it is not the world.

And I think that's pretty accurate. So if silver the CEO of ineffable intelligence is right then the next decade of AI tools looks nothing like the last three years.

But if he's wrong then somebody just a little billion dollars on fire in my opinion the investors who are putting money into this are not the kind that lose those bets often so I think this is going to be exciting to watch.

Okay Elon Musk versus Sam Altman this is finally going to trial heard the drama and seen the tweets back and forth for like I don't know it feels like forever over a year right.

The jury selection started this morning at the Oakland federal courthouse judge Yvonne Gonzalez Roger was presiding the open arguments are happening tomorrow.

NPR's Bobby Allen has a preview on this basically if you want the full timeline but the trial is scheduled to run four weeks and the witness list.

I mean this is just pure Silicon Valley tech drama but we have Elon Musk Sam Altman Greg Brockman we have Satya Nadella all of them are expected to take this stand.

And the case has been narrowed very dramatically originally there was about 26 claims that Musk filed in 2024.

So yeah geez this has been like two years only two of those claims have survived unjust enrichment and breach of charitable trust.

The arguments basically are going to boil down to this Elon Musk donated tens of millions of dollars to open AI when it was a nonprofit and then Sam Altman according to him defrauded him by converting it into a for profit now valued near a trillion dollars.

If you're a knowledge worker watching AI policy I think this matters way beyond kind of this personal feud that we've seen play out.

Judge Gonzalez Rogers could effectively pause open a eyes for profit conversion or rewrite the rules for how nonprofit AI labs become commercial entities which I think like there's a lot of cascading impacts that could happen on to and

and profit and I think on to the next kind of gen of these AI models over on X carousel called it quote the case that determines whether a eyes foundational nonprofit promise means anything I think that's kind of accurate.

If you watch the Nadella testimony in particular I think that's where the actual partnership facts are going to come out under oath and it is going to be especially spicy given what Microsoft and open AI just announced today.

So this is wild but let's talk about what Microsoft and open AI just announced today.

Open AI and Microsoft announced a fundamental rewrite of the partnership that has powered most of the consumer AI revolution Microsoft loses its exclusive license to open AI models and open AI is now free to sell its products on AWS Google Cloud and basically anywhere it wants.

So Microsoft was kind of holding this back for quite a while here and I think open AI hated this because you saw anthropic get massive adoption with enterprise Microsoft is going to stop pain revenue share to open AI and open a eyes revenue share Microsoft is now capped before it was uncapped.

So running through 2030 CNBC's Hayden field was reporting on this and Bloomberg the financial times information everyone was basically writing stories about this has been pretty wild widely reported on Microsoft stock dropped about 5% before pairing to around 2% Amazon was up 1% on this exact same headline.

I think before we get into what this actually means and why I think I think the bullcase is being floated perhaps I want to give a quick shout out to my own startup which is AI box if you're paying for chat GPT plus claw Gemini a groc 11 labs for audio image there's tons of these different models out there.

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You get every flagship from opening an anthropic Google X AI plus you get a ton of open source heavy hitter models you pick the model that is the best for the task in front of you.

So you're not forced to kind of you know use one model and use that for everything right anthropic is awesome for text but doesn't generate images so you got to go over to chat GPT and then you want to go use something to kind of scale up your audio you got to go over to 11 labs all of that is in one place.

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Okay let's talk about what's going on with open AI and Microsoft because open AI just stripped Microsoft's exclusive license and I think that there is a lot happening downstream of that decision.

Structurally what actually changed is that Microsoft is going to remain open AI's primary cloud partner as you are still gets first launch on new products kind of in theory but the exclusivity is gone opening I can serve any product on any cloud and Microsoft is no longer going to pay a revenue share back to open AI on

resold product so opening eyes revenue share to Microsoft is still 20% but it's now capped and the cap runs through 2030 so Microsoft keeps the IP license through 2032 but it is non exclusive and Microsoft keeps its 27% equity stake it's currently valued at around 135 billion dollars according to Bloomberg the market read on this though is actually kind of bad for Microsoft.

So web bushes Dan Ives who is normally kind of a permanent bowl on everything Microsoft he actually flipped the framing in his note this morning he said that the deal quote puts opening I in a strong path forward to going public and he also said that it is a positive moment from Microsoft because it lets them quote develop tech independence from opening I they also can do things like partner with an

anthropic and you know for copile or something like that so Ives is basically reading into it as both companies winning but if you look at something like the

cobeschi letter on X they just posted a stock down chart with the line they said the AI revolutions most important couple is officially open marriage I think both of these are going kind of viral both of these different

takes right like oh it's good for everyone or maybe this isn't the greatest thing I think the second order angles are where it gets really

interesting and where I think the surface coverage is kind of missing the story first this lands two days before

Microsoft reports their Q3 fiscal earnings and also as yours growth has been guided 37 to 38% in kind of constant

currency and that is decelerating from 40 the prior year and Microsoft has been blaming you know like the GPU supply like oh man we can't

grow as much as we want there's just kind of GPU supply problem if Wednesdays call now you know has to also explain how losing

exclusive open AI distribution effects forward Azure demand that is a much harder story to spin and second I think this is kind

of the formal end of the standoff that leaked in the open AI internal memo on April 13th where open AI's revenue chief Dennis dresser basically told all of the staff

that the Microsoft partnership had quote limited our ability to reach enterprise customers and I think that demand for the Amazon

bedrock offering was quote frankly staggering so today's announcement is essentially open AI legalizing what they were already doing

and I think that third part of this is that this also kicks the can on the FTC's review of the original open AI Microsoft structure

a non exclusive license is a much harder antitrust target and I think that timing is not a coincidence Microsoft and open AI both said today they wanted to quote

simplify the partnership which I'm pretty sure is just like corporate speak for you know let's give the regulators less surface area to pull on

so they're like we're getting scrutinized let's change the arrangement and then you know by the time the government which is insanely slow on anything gets around to it it's

you know more a little more kosher so now if you want the bullcase for Microsoft on this it's kind of the opposite of my opinion but if you want it I think what you what you could say

is that Microsoft didn't actually lose that much you know they kept the 20% equity stake they kept the IP license

you know they kind of got off the hook for paying a revenue share they didn't really want to pay anyways

and they freed themselves to ship Anthropics Claudus inside of Copilot which they are reportedly already piloting so

that's kind of the bullcase on why it's not really that big of a deal but even with all of that I still think Microsoft

is the big loser today the exclusive sale channels was you know Microsoft's actual moat equity and open AI is awesome

but it doesn't really protect Azure's enterprise pipeline and the entire reason that as you're out

grew AWS over the last two years was the open AI lock in so many companies were forced to move over to a

zero if they wanted to get the latest and greatest from opening I because that was the only place it was going AWS now gets to compete on price

and surface area with the exact same model and the open AI memo from two weeks ago basically tells you exactly what

demand looks like it is staggering so in open AI's own words I think we're going to see some really big movement over on AWS

Brad Gershner at Altimer has been basically pounding the drum that open AI is on a path to a hundred billion dollars

and revenue inside of a couple years if he's even half right then the company that just lost exclusive distribution

Microsoft to that revenue stream that's a pretty big hit so the last piece is that this is the partnership

restructure on the same day that Sam Altman Elon Musk and Satya Nadella are all walking into the Oakland

courtroom for a four week trial and if you're trying to kind of read the future of AI as a business I think today is

one of the cleanest possible signals that the consolidated kind of opening I Microsoft era is over these I think we're going to see a lot

more competition and deals play out across all of the different cloud providers the different model providers all of the

different vendors and I think overall this is good for you know capitalism it's good for the market it's good for consumers so I'm happy with

this all right that's the show for today if you got something out of it it would mean the world to me if you dropped a

comment on Apple podcast or if you hit the stars over on Spotify it's the about tab where you can kind of drop some stars

on Spotify anyways thank you so much for tuning in if you want to get access to over 80 AI models and an automation

builder that runs on plain English for 899 a month go check out my startup AI box dot AI a link is in the

description I'll catch you guys all in the next episode