Microsoft reportedly drops its observer seat on OpenAI board due to regulatory scrutiny.

• In November, Microsoft acquired a nonvoting board seat at OpenAI to address concerns about its involvement in the startup.
• During a tumultuous time, OpenAI CEO Sam Altman was dismissed and subsequently reinstated.

According to reports, the company announced that it would relinquish its observer position on the OpenAI board due to regulatory investigations into generative AI in both Europe and the U.S.

According to multiple media reports, Microsoft's Deputy General Counsel Keith Dolliver wrote a letter to OpenAI late Tuesday stating that the position had given insights into the board's activities without compromising its independence.

According to the Financial Times, Microsoft had "made significant progress with the newly formed board."

CNBC has reached out to Microsoft and OpenAI for comment.

Microsoft may face an antitrust investigation from the European Commission regarding its virtual worlds and generative artificial intelligence markets.

The EU Commission, acting as its executive branch, announced in January that it would investigate certain agreements between major digital market players and generative AI developers and providers, specifically mentioning the Microsoft-OpenAI partnership as a deal of interest.

The EU antitrust regulators announced in June that they would seek the opinions of external parties regarding the deal.

In November, Microsoft acquired a nonvoting board seat at OpenAI to address concerns about its involvement in the startup, after a tumultuous period during which OpenAI CEO Sam Altman was fired and then reinstated.

At the time, Altman wrote a note to staff stating that OpenAI had made the right decision to partner with Microsoft and he was thrilled that their new board would include Microsoft as a non-voting observer.

After launching its ChatGPT chatbot in late 2022, OpenAI became one of the most popular startups worldwide. The technology enables users to enter basic text queries and receive intelligent and imaginative responses that can lead to more in-depth discussions.

Microsoft has invested billions of dollars in startups, with its total investment to date reportedly reaching $13 billion. The tech giant has emerged as the leader in the push toward foundation AI models due to its investment in and partnership with OpenAI.

This is a breaking news story and is being updated.