Microsoft's decision to relinquish its OpenAI board observer seat does not alleviate major concerns.

• Despite the clarity provided by this week's changes at OpenAI, many of the same regulatory and safety concerns remain.
• The FTC will continue to scrutinize the relationship between Microsoft and OpenAI, according to a source who requested anonymity due to confidentiality.
• The same concerns about prioritizing profits over safety and ethics in the AI industry persist among developers and researchers.

Despite being expected to take an observer seat on OpenAI's board, has decided not to pursue one, according to the Financial Times. However, the changes made this week have not provided clarity on the same concerns that persist.

The same concerns about prioritizing profits over safety persist among regulators and those who prioritize ethics in artificial intelligence. Amba Kak, co-executive director of the AI Now Institute, characterized the announcement as a form of "subterfuge" meant to conceal the connections between major tech companies and newcomers in the field of AI.

""The move is timed to address global regulatory scrutiny of unconventional relationships," Kak wrote in a message to CNBC."

The scrutiny of the Federal Trade Commission on the tight Microsoft-OpenAI bond and the significant control the two companies have over the AI industry will continue, according to a source who requested anonymity due to confidentiality.

Despite concerns about safety and ethics in the AI industry, a group of AI developers and researchers who are concerned about these issues remain unmoved. An open letter published on June 4 by current and former OpenAI employees highlights their concerns about the rapid advancements in AI, which are taking place without proper oversight and whistleblower protections.

"The employees wrote in a letter that AI companies have strong financial motivations to evade effective oversight, and bespoke structures of corporate governance are not enough to change this. They stated that AI companies currently have weak obligations to share some information with governments and none with civil society, and they cannot be trusted to share it voluntarily."

A source close to CNBC confirmed that the FTC and Justice Department were planning to launch antitrust probes into OpenAI, Microsoft, and other companies, focusing on their behavior.

Lina Khan, the FTC Chair, has characterized the agency's action as a "market investigation into the partnerships and investments being formed between AI developers and major cloud service providers." Khan stated to CNBC that regulators' efforts are helping to obtain answers and ensure transparency.

Microsoft stated that it is content with the revamped board of the startup and can now step aside, despite not mentioning regulators in its explanation for giving up its board observer seat.

Microsoft joined the OpenAI board in November, following the Altman controversy. The new board members include Paul Nakasone, former director of the National Security Agency, Quora CEO Adam D'Angelo, former Treasury Secretary Larry Summers, ex-Salesforce co-CEO Bret Taylor, and Altman. Additionally, new members were added in March, including Dr. Sue Desmond-Hellmann, former CEO of the Bill and Melinda Gates Foundation; Nicole Seligman, former executive vice president of Sony; and Fidji Simo, CEO of YouTube.

Microsoft has announced a change in its approach to engaging with strategic partners, while Apple and the other companies have not made any statements. No comments were provided by any of the three companies to CNBC regarding this story.

Microsoft's latest move is beneficial for the AI industry because of its perceived influence at OpenAI. According to João Sedoc, an assistant professor of technology at New York University's Stern School of Business, it was "essential" for Microsoft to "intervene and stabilize" OpenAI after the abrupt dismissal and subsequent reinstatement of Altman.

"Microsoft's presence in the industry presents a conflict of interest and competitive advantage, according to Sedoc. Additionally, Sedoc stated that Microsoft and OpenAI have a unique relationship characterized by both synergies and competition."

'Huge amount of information'

Microsoft's $13 billion investment in OpenAI supports their close collaboration in delivering generative AI products and services. ChatGPT, OpenAI's popular chatbot, utilizes its large language models that run on Microsoft's Azure cloud technology.

Although the two companies share some similarities, they are not entirely aligned. Recently, Microsoft acquired Inflection AI's technology and key talent, including CEO Mustafa Suleyman, who previously founded DeepMind, the AI startup acquired by Google in 2014.

After the Inflection deal, Microsoft is now on the path to becoming a real competitor with OpenAI, so it should not be in the startup's boardroom, according to Ben Miller, CEO of investment platform Fundrise.

Miller stated that having a voice at the table is highly influential to the company and provides Microsoft with valuable insights into the company's activities.

CNBC reported that Sedoc stated that the separation of big tech companies from their investments in AI is the correct precedent, citing examples of AI startups like Anthropic, which is backed by Amazon, and Hugging Face, whose investors include Google, Amazon, and others.

Sedoc said that they are likely considering the potential consequences of this action on the broader industry trend.

One area where Sedoc mentioned as potentially problematic is AI safety.

"Sedoc believes that Microsoft has more expertise and a longer history in considering various domains than OpenAI, and therefore, their absence from the table may have some negative consequences."

The disagreement between Altman and the earlier OpenAI board centered on AI safety practices, which remains a contentious issue at the company.

In May, OpenAI disbanded its team focused on the long-term risks of AI, just one year after the company announced the group. The news broke days after both team leaders, OpenAI co-founder Ilya Sutskever and Jan Leike, announced their departures from the company. In a post on X, Leike wrote that OpenAI's "safety culture and processes have taken a backseat to shiny products" and that he is "concerned" the company is not on the right trajectory.

""OpenAI is taking on a massive responsibility for all of humanity with the development of machines that surpass human intelligence," Leike stated."

OpenAI announced that Nakasone would join the Safety and Security Committee, which was recently established to evaluate the company's processes and safeguards for 90 days before making recommendations to the board and updating the public.

—CNBC's Ryan Browne, Matt Clinch and Steve Kovach contributed reporting.

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