Before we get to today’s column, we’ve got an update in tech’s favorite relationship: OpenAI and Microsoft. As a result of a revision to their deal, Microsoft Azure no longer has exclusive rights to sell OpenAI models and that Microsoft no longer has to share 20% of the revenue it makes from selling OpenAI models on Azure with OpenAI.

Both could be significant concessions and it’s hard to immediately gauge which side is giving up more in this deal. The ChatGPT maker’s plan to release an AI agent product through Amazon Web Services raised concerns last month among senior Microsoft executives that the product would violate OpenAI’s contract to run models exclusively on Microsoft’s Azure cloud.

On to today’s column…

Cutting-edge AI is notoriously expensive to run. Some startups classify portions of their AI inference spending as marketing expenses rather than cost of goods sold. While that doesn’t change the overall losses they report, it does help their gross profit margins, a metric investors obsess over.

One example is AI coding startup Cursor, which SpaceX now has an option to buy for $60 billion. While Cursor’s annualized revenue rate has grown at a steady clip to $2.7 billion last month from $1 billion in November, high computing costs has kept a lid on gross margins. As we reported on Thursday, Cursor’s gross margin was negative 23% in the quarter ending in January and only recently turned positive.