As Microsoft is getting out of CoreWeave’s contractual obligations, OpenAI is coming in.
I’ve covered CoreWeave IPO in the last weekly newsletter.
And yet, it’s not about the news itself but what it might represent.
For context, Microsoft was CoreWeave’s main customer, and the company is about to IPO.
Why this move now?
To put it briefly, this represents the undoing of the Microsoft-OpenAI partnership.
CoreWeave is only the tip of the iceberg of a partnership – Microsoft-OpenAI – which culminated in a honeymoon in 2019 and is ending now, first turning them into frenemy and quite quickly into enemy territory.
But more importantly, this is a strong, qualitative signal of something else: the AI industry is moving to a second phase of market development.
As the first key partnership established in the first AI wave is getting undone, the underlying market structure is changing.
Indeed, Microsoft and OpenAI’s partnership started in 2016, yet it ramped up in 2019 and peaked in 2021-22, as OpenAI successfully released its GPT series and ChatGPT.
The relationship between Microsoft and OpenAI had turned so symbiotic that many had argued Microsoft had acquired OpenAI.
In the coopetition piece, I’ve explained why that was not the case and why the relationship, while shifting from friends/partners to frenemies, could not last in the long term, as this would have jeopardized Microsoft’s long-term competitive moats.
For one thing, the undoing of the partnership, which worked as a model for the industry (see Antrhopic-Amazon, Google-DeepMind), is now showing something quite interesting: the AI market is entering, on the model side, a first maturity stage.
That tells you, as I’ve been saying for a few months, we’ll see the emergence of new dynamics in the market, where coopetition gets less intense, as actually, players will move by verticalizing their efforts, thus bringing as much as possible in house, as the market further developed.
Indeed, as I’ve explained in the coopetition piece, it usually comes up in the early days of a market, as boundaries are quite blurred since competition dynamics have not yet emerged, creating a clear divide among different players.
And we’re now at a stage where, for instance, each player is finding its sweet spot on the model side.
Indeed, each could serve anyone at the start of the first wave of AI models.
However, each of them is now moving into a specific target market.
