Class Action Alleges Microsoft Choked AI Supply to Lift ChatGPT Costs
News Summary
A class-action lawsuit accuses Microsoft of using its Azure cloud dominance to restrict the supply of computational resources to OpenAI, thereby artificially inflating ChatGPT costs for nearly three years. The suit alleges Microsoft turned an investment into a "stranglehold" over OpenAI's supply chain while simultaneously developing its own competing AI products. Plaintiffs highlight that when OpenAI began purchasing compute from Google Cloud in June 2025, ChatGPT token prices reportedly dropped 80 percent within weeks, which is presented as strong evidence of Microsoft's anticompetitive restraint. The lawsuit, filed by eleven ChatGPT Plus subscribers, seeks damages for overcharges from November 2022 to February 2025, and warns that Microsoft still retains contractual power to throttle OpenAI's supply. The complaint likens the case to U.S. v. Microsoft, calling the company a "recidivist violator" applying its "exclusionary playbook" to AI. Besides monetary damages, plaintiffs are seeking a permanent injunction against exclusive compute deals with OpenAI and disclosure of internal communications regarding compute supply, pricing, and integration.
Background
Microsoft's partnership with OpenAI began in 2019 with multi-billion dollar investments, making Microsoft the exclusive cloud provider for OpenAI's commercial models via its Azure platform. This collaboration positioned Microsoft strategically in the rapidly evolving generative AI landscape and allowed it to integrate AI capabilities into its core products. This case emerges amidst increasing antitrust scrutiny in the United States, with growing concerns over the market dominance of large technology companies. Microsoft itself faced a high-profile antitrust lawsuit in the 1990s. Furthermore, in 2025, the global AI market is intensely competitive, with major tech firms vying to launch and improve their AI offerings, making compute resource availability and cost critical competitive factors. Notably, the incumbent US President Donald J. Trump (re-elected November 2024) and his administration may continue to focus on the market conduct of tech giants. The relationship between OpenAI and Microsoft is also reportedly shifting, with Japan's SoftBank said to be negotiating an investment in OpenAI, potentially diluting Microsoft's stake.
In-Depth AI Insights
What are Microsoft's true strategic intentions beyond short-term profit, and does this signify a deeper play for market control? - Microsoft's equity investment and exclusive cloud contract with OpenAI likely aimed to secure a strategic control point over critical AI infrastructure, extending beyond mere financial returns. By controlling OpenAI's compute, Microsoft could not only profit from Azure sales but also potentially influence OpenAI's product development pace and market pricing, thereby limiting competitors. - This approach reflects a common strategy among tech giants to leverage existing ecosystem advantages (like cloud dominance) to cement future market positions in nascent, high-growth markets like generative AI. It could be a long-term play to maintain a central role within its AI ecosystem. How might this lawsuit impact the competitive landscape of the generative AI market? - A successful lawsuit could compel Microsoft to modify its contract with OpenAI or limit exclusive terms in its cloud service provisioning, potentially creating a more level playing field for other cloud providers and AI developers. - This may also prompt stricter antitrust scrutiny from regulators on AI infrastructure and platforms, especially for tech giants that both invest in AI companies and provide their core compute services. This could lower barriers to entry for new players and foster AI innovation. How should investors assess the risks and opportunities for Microsoft and other cloud/AI giants? - Risks: Microsoft faces potential reputational damage, substantial fines, and forced business model adjustments, which could impact its Azure cloud growth and relationships with AI partners. Other tech giants with similar vertical integration models might face analogous regulatory challenges. - Opportunities: For alternative cloud providers like Google, this could be an opportunity to expand their market share in AI compute. Simultaneously, if AI compute costs decrease, it could stimulate broader AI adoption and innovation, benefiting software and service companies across the AI ecosystem in the long run.