Microsoft hints at a big change to its OpenAI investments in a new SEC filing

• Microsoft disclosed an equity investment in OpenAI for the first time, SEC filings show.
• Microsoft previously disclosed its relationship with OpenAI as only a "partnership."

Microsoft disclosed an equity investment in OpenAI for the first time, according to its latest SEC filings.

On Wednesday, the company released its quarterly results. In legally required disclosures, Microsoft included information about its relationship with OpenAI.

"We have an investment in OpenAI Global, LLC ("OpenAI") and have made total funding commitments of $13 billion," Microsoft wrote in the SEC filing on Wednesday. "The investment is accounted for under the equity method of accounting."

Accounting expert Francine McKenna told Business Insider that the new disclosure suggests that Microsoft's previous investments in OpenAI were "soft money," such as discounts or credits for services and internal spending that fell below a certain threshold where the software giant didn't need to publicly disclose details.

The latest "equity method investment" disclosure signals that Microsoft recently purchased stock or share rights in OpenAI, instead of just partnering, said McKenna, who writes The Dig newsletter.

In early October, OpenAI completed a $6.6 billion funding round and Microsoft took part in that deal. OpenAI also began a process of changing from a mostly non-profit organization to a more traiditional for-profit business.

In a previous SEC filing, Microsoft described the nature of its relationship with OpenAI as a partnership rather than an equity investment.

"We have a long-term partnership with OpenAI, a leading AI research and deployment company," Microsoft wrote in its annual SEC filing from late July. "We deploy OpenAI's models across our consumer and enterprise products. As OpenAI's exclusive cloud provider, Azure powers all of OpenAI's workloads. We have also increased our investments in the development and deployment of specialized supercomputing systems to accelerate OpenAI's research."

Microsoft's has had a relationship with OpenAI since 2019, using the startup's large language models to underpin its own generative AI products, such as its AI assistant Copilot. In return, Microsoft provides OpenAI with massive cloud-computing resources.

The relationship between the companies has evolved in recent months. In the July filing, Microsoft listed OpenAI as a competitor for the first time.

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