The China deal OpenAI itself won't make
Microsoft has become the main channel through which OpenAI's models reach China, selling the GPT series via Azure to the country's largest internet companies even as OpenAI and Anthropic keep their own models out of the market on intellectual-property and misuse grounds. The arrangement, detailed this week by Bloomberg, gives Microsoft a position no other US AI vendor holds: it profits from selling models whose own creators won't deal with Chinese firms directly.
The scale
- ByteDance has been Microsoft's largest AI customer, running largely on OpenAI models, and is on track to spend more than US$1 billion a year on Microsoft's AI and cloud services, per Bloomberg's sources.
- Ant Group, Meituan, and Tencent also buy models through Azure, though Ant says its core products rely on its own models.
- Azure's AI revenue in China grew faster than in any other territory - roughly tripling in the year to June 2025 after climbing about 400% the year before, a then-senior Microsoft executive told staff. Microsoft's president has separately told lawmakers China was about 1.5% of 2024 revenue.
Why it all runs through Microsoft
The key is Microsoft's singular contract with OpenAI, which lets it set its own terms for selling GPT models abroad. Both OpenAI and Anthropic have declined to sell into China directly, and Anthropic's models are absent from Microsoft's China line-up entirely - leaving Microsoft as the intermediary for models their makers consider too risky to serve there. Risk is the running tension: OpenAI has privately pressed Microsoft to do more to stop Chinese customers from "distilling" its models, the practice of using one model's outputs to train another. Microsoft points to automated monitoring and a policy of selling only to established companies, and it doesn't host the models on Chinese soil - customers reach them over the internet from data centres elsewhere, including Singapore. Even so, sources say Chinese buyers face no extra scrutiny and synthetic data is hard to police.
Playing both sides
The contradiction sharpens alongside what Microsoft hosts: it added DeepSeek's R1 to Azure in January 2025 and is now testing a fine-tuned, Azure-hosted DeepSeek-V4 as a cheaper option for its Copilot Cowork agent. So Microsoft is selling a Chinese model into Western businesses while selling American models into Chinese ones, earning margin on both legs - a balancing act that's increasingly contentious in Washington, where lawmakers cast China's AI push as a threat and OpenAI's private objections could grow louder.