Microsoft CEO Satya Nadella highlighted that both Microsoft and OpenAI had a significant two-year head start in the AI race, allowing them to develop technologies like ChatGPT with minimal competition.

This lead provided OpenAI with what Nadella referred to as 'escape velocity,' enabling rapid advancements in AI capabilities.

The launch of ChatGPT in November 2022 sparked an AI arms race among tech companies, prompting competitors like Google to express surprise and claims of being unprepared.

In response to the launch, Microsoft swiftly integrated OpenAI's technology into its Office applications, Bing search engine, and Edge browser, positioning itself ahead of rivals.

The partnership between Microsoft and OpenAI allows for the integration of advanced AI models into Microsoft's offerings, while OpenAI benefits from Microsoft's robust cloud computing infrastructure.

However, a recent SEC filing from Microsoft described its relationship with OpenAI as an equity investment rather than a traditional partnership, indicating a shift in their collaboration.

Microsoft has been a significant investor in OpenAI since 2019, with total investments reaching $13 billion, including a notable increase following the ChatGPT launch.

Regulators investigated Microsoft's multi-billion dollar investment in OpenAI to determine if it constituted an acquisition but concluded it was simply an investment.

Despite the collaboration, some insiders have raised concerns that Microsoft has become an 'IT department' for OpenAI, potentially hindering its own AI initiatives.

Indeed, some of Microsoft's projects, such as Azure Cognitive Search and Azure AI Bot Service, have reportedly faced setbacks due to the focus on the partnership with OpenAI.

Nadella acknowledged broader struggles within leading AI labs to develop advanced models, primarily due to a shortage of high-quality training content.

In a separate comment, Nadella noted that while Google has the potential to lead in AI, it has not capitalized on this opportunity, a statement that drew a rebuttal from Google CEO Sundar Pichai.