{"id":35451,"date":"2025-08-28T04:36:44","date_gmt":"2025-08-28T04:36:44","guid":{"rendered":"https:\/\/financialrush.com\/?p=35451"},"modified":"2025-08-28T04:36:44","modified_gmt":"2025-08-28T04:36:44","slug":"openais-game-of-chicken","status":"publish","type":"post","link":"https:\/\/financialrush.com\/?p=35451","title":{"rendered":"OpenAI\u2019s game of chicken"},"content":{"rendered":"

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One scoop to start: <\/strong>A former top German central banker is set to lead<\/a> the supervisory board of the country\u2019s most valuable fintech N26 as part of a leadership reshuffle that aims to resolve a conflict between investors and founders.<\/p>\n

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Welcome to Due Diligence, your briefing on dealmaking, private equity and corporate finance. This article is an on-site version of the newsletter. Premium subscribers can sign up here<\/a> to get the newsletter delivered every Tuesday to Friday. Standard subscribers can upgrade to Premium here<\/a>, or explore<\/a> all FT newsletters. Get in touch with us anytime: Due.Diligence@ft.com<\/a><\/p>\n<\/div>\n<\/div>\n<\/div>\n

In today\u2019s newsletter:\u00a0<\/strong><\/p>\n

OpenAI\u2019s thorny restructuring<\/h2>\n

OpenAI<\/strong>\u2019s position as the world\u2019s most popular chatbot maker has allowed it to raise billions of dollars from investors, with the latest proposed share sale set to value<\/a> the business at half a trillion dollars.<\/p>\n

But complications over its corporate restructuring could endanger future fundraising plans.<\/p>\n

The ChatGPT <\/strong>maker has been locked in discussions<\/a> to rewrite its commercial contract with Microsoft<\/strong> and those talks are now likely to slip into next year.<\/p>\n

That would allow investor SoftBank<\/strong> to withhold a $10bn commitment to OpenAI and hamper the AI group\u2019s efforts to raise money in the future, according to DD\u2019s George Hammond and the FT\u2019s Stephen Morris.<\/p>\n

Microsoft got in early at OpenAI with a partnership that gave it exclusive access to use and distribute the chatbot maker\u2019s technology. <\/p>\n

But for OpenAI to restructure, it\u2019ll have to renegotiate that deal. And the trouble is, there are a couple of big sticking points.<\/p>\n

First off, OpenAI wants to boost its revenues by giving other Big Tech cloud providers such as Google <\/strong>and Amazon Web Services <\/strong>the right to host its models.<\/p>\n

At the moment, Microsoft has dibs on those rights and it has little incentive to change that. There might be a workaround though: the two sides are negotiating a narrow agreement that would enable OpenAI to only serve government customers that are not on Microsoft\u2019s cloud platform.<\/p>\n

The bigger disagreement is over Microsoft\u2019s future access to OpenAI\u2019s intellectual property.<\/p>\n

The companies are arguing over whether Microsoft will be allowed to see how future models are trained or merely be allowed to use them in its products.<\/p>\n

Related to that is an \u201cartificial general intelligence\u201d \u2014 or AGI \u2014 clause written into the contract between the two.<\/p>\n

The clause lets OpenAI cut Microsoft\u2019s IP access if its models reach a stage where they are \u201chighly autonomous\u201d and outperform humans at \u201cmost economically valuable work\u201d.<\/p>\n

It\u2019s a slightly nebulous concept that could give OpenAI a way to eject Microsoft from much of the current agreement. OpenAI wants to keep the clause as leverage, but Microsoft wants to do away with it entirely.<\/p>\n

There\u2019s a lot on the line for both sides. If OpenAI insists on retaining the clause, it risks its restructuring dragging on into the new year, jeopardising future funding as it burns through cash at a furious clip.<\/p>\n

It\u2019s a staring contest and for now, neither side is blinking.<\/p>\n

The hedge funds scaring reinsurers<\/h2>\n

The past few years have seen throngs of private investors descend upon the reinsurance sector, hoping to pull in higher yields than traditional fixed-income investments such as government bonds.<\/p>\n

That could destabilise the centuries-old market for catastrophe cover, Stefan Golling<\/strong>, a director at Munich Re<\/strong>, the world\u2019s biggest reinsurer, has warned<\/a>.<\/p>\n

Even insurance groups don\u2019t want to shoulder all the costs of things going belly up. To shield themselves and spread that risk, they purchase insurance from other businesses, known as reinsurers.<\/p>\n

For many years, that corner of the insurance market was dominated by the likes of Munich Re<\/strong>, Swiss Re<\/strong> and Warren Buffett<\/strong>\u2019s Berkshire Hathaway<\/strong>.<\/p>\n

Nowadays they\u2019re facing competition from new players including hedge funds such as Elliott Management<\/strong>, and family offices.<\/p>\n

Hedge funds and specialist fund managers have moved into property and casualty reinsurance over the past decade, with alternative capital in the sector reaching $115bn by the end of 2024, according to Aon<\/strong>. That\u2019s up from $93bn two years earlier.<\/p>\n

New entrants mean more options at a time when natural disasters are becoming more common. But Golling, a board member of the 145-year-old German insurer Munich Re, said it also introduces greater risk and volatility.<\/p>\n

Golling told the FT\u2019s Lee Harris that a big payout event could cause newcomers to lose their nerve. That could raise the price of insurance, he said, pointing to the aftermath of Hurricane Ian in Florida three years ago.<\/p>\n

Private investors were uncertain about the losses they faced, prompting some to withdraw, which led to \u201cstress\u201d in the market, Golling said.<\/p>\n

He also criticised private investors for only signing up to cover the most statistically improbable risks such as megastorms that occur once every few decades, rather than more common events such as hail.<\/p>\n

Funnily enough, that\u2019s a criticism often levelled at Munich Re and its peers.<\/p>\n

Job moves<\/h2>\n