Microsoft is reportedly exploring taking legal action against Amazon and OpenAI, should it determine that their $50bn agreement violates its own exclusivity arrangements with OpenAI.

As reported by the Financial Times, the dispute surrounds whether Amazon Web Services (AWS) should be able to offer OpenAI's "Frontier" product without violating previous agreements with Microsoft that state OpenAI products must be routed through the Microsoft Azure platform.

OpenAI and AWS entered into an agreement in late February, which saw Amazon invest $50 billion in the AI startup - $15bn upfront, and $35bn in the coming months. Further terms of that investment will see OpenAI using 2GW of AWS' Trainium AI chip-based capacity, jointly developing a "Stateful Runtime Environment" using OpenAI models and available via Amazon Bedrock, and making AWS the "exclusive third-party cloud distribution provider for OpenAI Frontier."

OpenAI Frontier is a platform that will enable companies to build, deploy, and manage teams of AI agents across business systems with shared context.

OpenAI and Amazon have said they are creating a solution that will work around Microsoft's exclusivity agreement with OpenAI, but the FT reports - citing unnamed sources familiar with the discussions - that Microsoft executives dispute this is possible and would at the very least violate the "spirit" of their agreement, even if it found loopholes.

Talks remain ongoing with the hopes of resolving the dispute without resorting to legal proceedings.

“We know our contract,” said a person familiar with Microsoft’s position. “We will sue them if they breach it. If Amazon and OpenAI want to take a bet on the creativity of their contractual lawyers, I would back us, not them.”

OpenAI, meanwhile, according to another FT source, believes its plans with Amazon are not a violation and that Microsoft is unlikely to pursue legal action due to the anti-competition probes the cloud giant is currently facing worldwide related to its Azure licensing practices.

OpenAI itself is also in the midst of a legal dispute with Elon Musk.

Microsoft and OpenAI have a lengthy and complicated relationship. Microsoft invested in the AI startup in 2019, at the time taking a 32.5 percent stake in the for-profit business and role as OpenAI's sole compute provider until the breakout success of ChatGPT led OpenAI to demand more compute.

Throughout the January 2025 launch of OpenAI's Stargate project, Microsoft retained a right of first refusal for any cloud contracts with OpenAI, but as of October 2025, with OpenAI's pivot to a for-profit public benefit corporation, this was no longer the case.

Microsoft remained a cloud provider for OpenAI, and to have exclusive IP rights and Azure API exclusivity until Artificial General Intelligence (AGI) is met.

It is the latter issue that Microsoft is clinging to currently, arguing that the "Stateful Runtime Environment (SRE)" would see OpenAI LLMs running in Amazon's Bedrock platform, accessing company data stored on AWS, and enabling the agents to remember prior work, access software tools and data, and use computing power. Microsoft claims this violates the terms of its contract.

The FT reports, citing an internal memo, that AWS has told employees it can describe the SRE as being powered by, enabled by, or integrating with OpenAI, but cannot say it can access or use ChatGPT.

Amazon and OpenAI declined to comment to the FT. Microsoft said: “We are confident that OpenAI understands and respects the importance of living up to [its] legal obligation.”