Internal Microsoft emails shown in federal court Thursday during the Musk v. Altman trial reveal that the company's most senior executives were deeply skeptical of OpenAI years before committing what would become a $13 billion investment. The emails, first reported by WIRED, show a 2017-2018 email chain involving CEO Satya Nadella and more than a dozen executives debating whether OpenAI was worth funding at all.

The verdict from Microsoft's own CTO Kevin Scott: "I'm highly skeptical of an imminent breakthrough in AGI. They're treating us like a bucket of undifferentiated GPUs, which isn't interesting for us at all."

The Fear That Changed Everything

The email chain started in August 2017 when Nadella congratulated Altman on OpenAI winning a video game competition using AI. Ten days later, Altman responded asking for $300 million worth of Azure cloud computing services. "We could figure how to fund some of it but not that much," Altman wrote. "I think it will be the most impressive thing yet in the history of AI."

Nadella asked four lieutenants for input. The responses were brutal. Microsoft's AI team saw "no value in engaging." Its research team thought its own work was "more advanced." The PR team didn't want to support a group pushing the idea of "machines beating humans." Executive VP Jason Zander said he wouldn't want to "take a complete bath" financially.

An internal analysis showed Microsoft stood to lose about $150 million over several years. Zander wrote: "Unless he can help us draw a more direct networking effect with OpenAI to Microsoft business value, we will wind up having to pass."

The Amazon Threat

What changed the calculation was not belief in OpenAI's technology. It was fear of Amazon. Scott wrote that there could be "some PR downsides associated with not funding them, and having them storm off to Amazon in a huff and shit-talk us and Azure on the way out."

Zander echoed the same fear: "My worst case scenario is having them ditch Azure for AWS, as Kevin says bad-mouth us on the way over, and then land with some big new innovation that is shared with our competitors."

The irony is now extraordinary. Over the past few months, OpenAI committed to spend $138 billion on Amazon cloud computing services, and Amazon agreed to invest $15 billion to $50 billion in OpenAI. The exact nightmare scenario Microsoft was trying to prevent in 2018 happened anyway, just seven years later.

Nadella's Own Uncertainty

Nadella himself was candid in the emails: "Overall I can't tell what research they are doing and how if shared with us it could help us get ahead. From what Elon is telling everyone, he feels Open AI is at verge of some big AGI breakthroughs. They clearly are pushing AI at a level none of our first party or third parties are."

The thread went dark for months before reviving in January 2018 when Altman proposed licensing OpenAI's gaming AI to Xbox for $35 to $50 million in Azure credits. Xbox couldn't commit. Microsoft planned to cut off discounts entirely.

Roughly 18 months later, Microsoft announced a landmark $1 billion investment in OpenAI. That initial bet has since grown to $13 billion. The company that saw "no value in engaging" is now OpenAI's largest investor and most important partner.

Why This Matters for the Trial

Musk's attorneys introduced the emails to illustrate how Microsoft's relationship with OpenAI evolved from reluctant cloud provider to dominant investor. The subtext: the partnership that Musk alleges "looted" OpenAI's nonprofit mission didn't happen because Microsoft believed in the mission. It happened because Microsoft was afraid of losing a customer to Amazon.

Microsoft declined to comment. The trial continues through late May, with Altman expected to take the stand soon.

Sources: WIRED (Maxwell Zeff and Paresh Dave, May 7), PC Gamer, Yahoo Finance. Court exhibit via Box.com.