Nadella Testimony Reveals Microsoft’s OpenAI Dependency

Microsoft CEO Satya Nadella spent two days on the witness stand in the Musk v. Altman trial during the week of May 11, 2026, disclosing that he had worried about OpenAI supplanting Microsoft in the technology hierarchy as far back as April 2022. The testimony, combined with a new Copilot update for Edge and renewed investor interest in Microsoft stock, offers a rare window into how the company has managed — and sometimes struggled with — its multi-billion-dollar bet on AI.

Nadella’s Testimony: Dependency Fears and Musk’s Silence

Nadella concluded his testimony on Monday, May 11, according to CNBC. A central revelation: Elon Musk never raised concerns directly to Nadella about Microsoft’s investment in OpenAI, despite Musk naming Microsoft as a defendant and accusing it of aiding and abetting OpenAI’s alleged breach of charitable trust.

Musk’s lawsuit, originally filed in 2024, argues that OpenAI abandoned its founding mission of developing AI to benefit humanity in favor of profit. Microsoft is accused of facilitating that shift through its financial relationship with OpenAI. Nadella’s testimony appeared to undercut that framing — if Musk had concerns about Microsoft’s role, he never voiced them to the company’s CEO.

Nadella also addressed the structural anxiety Microsoft felt as OpenAI grew more powerful. According to CNBC’s reporting on May 13, discovery in the case showed Nadella was worried about OpenAI supplanting Microsoft in the tech hierarchy as early as April 2022. “It was becoming even more core and important that we had real agency at every layer of the stack,” Nadella testified.

The Stack Problem: Infrastructure Strength, Model Weakness

Nadella’s admission about needing “agency at every layer” points to a tension that has defined Microsoft’s AI strategy for four years. The company built a dominant position as an AI infrastructure provider — Azure hosts OpenAI’s training and inference workloads — but has struggled to compete at the model level, where Anthropic, Google DeepMind, and Meta have each shipped capable frontier models under their own names.

Microsoft’s commercial AI products — Copilot in Office, Bing, GitHub Copilot — all depend on OpenAI’s models. That dependency gave Microsoft fast access to state-of-the-art capabilities, but it also meant that any deterioration in the OpenAI relationship could hollow out Microsoft’s AI product line overnight.

The trial testimony, as covered by The Verge’s live updates, confirmed that this risk was not theoretical — it was actively discussed inside Microsoft’s leadership as far back as 2022, well before the November 2023 board crisis that briefly threatened Sam Altman’s position at OpenAI.

Microsoft has since made moves to diversify its model exposure, including deals with Mistral and access to models from other providers through Azure AI Foundry. Whether those moves are sufficient to reduce the dependency Nadella described remains an open question.

Edge Copilot Gets Cross-Tab Context

Separate from the courtroom, Microsoft on May 13 announced a meaningful update to Copilot inside the Edge browser. According to The Verge, the new feature allows Copilot to pull information from all open tabs simultaneously — letting users ask questions, compare products, or request summaries across everything currently open in the browser.

Microsoft’s announcement on the Edge Dev Blog stated that users can “select which experiences you want or leave off the ones you don’t,” framing the feature as opt-in rather than automatic.

As part of the same update, Microsoft is retiring Copilot Mode — a prior feature that also drew from open tabs and included agentic capabilities such as booking reservations. Those agentic functions have been folded elsewhere in the product. The net effect is a consolidation of Copilot’s browser-facing surface area rather than a pure expansion.

The update is notable because cross-tab context is one of the more practically useful AI browser features — it addresses the real workflow of users who research across multiple pages before making a decision. Competing browsers, including Google Chrome with its Gemini integration, have targeted similar use cases.

Investor Confidence Holds Despite Stock Underperformance

Microsoft’s stock has declined 16% in 2026 while cloud peers have traded higher, according to CNBC. That underperformance has not shaken at least two prominent voices.

Bill Ackman disclosed a new position in Microsoft, and his reasoning aligned closely with arguments made by CNBC’s Jim Cramer. CNBC reported on May 15 that Cramer said on Squawk on the Street: “The main reason we don’t want to sell [Microsoft] is because they actually have the balance sheet to do what they want. Tomorrow, they could do something that is so revolutionary that we could say, ‘Why did we doubt them?'”

The balance sheet argument is straightforward: Microsoft’s cash position gives it the ability to acquire, invest, or build at a scale few companies can match. Ackman’s entry into the stock suggests at least some institutional investors see the current price as an opportunity rather than a warning sign.

The analyst community has broadly maintained positive ratings on Microsoft shares. The stock’s 2026 decline appears tied more to broader market rotation and concerns about AI monetization timelines than to any fundamental deterioration in the business.

The Trial’s Broader Stakes for Microsoft

The Musk v. Altman trial, which moved toward closing arguments on May 14 with an audio livestream available via YouTube, carries real consequences for Microsoft beyond reputational exposure.

If the court finds that OpenAI breached its charitable trust — and that Microsoft aided that breach — it could create legal and structural pressure on the commercial relationship between the two companies. A ruling against OpenAI could also affect how Microsoft accounts for its equity stake and licensing arrangements.

Nadella’s testimony that he had no warning from Musk about these concerns, combined with his acknowledgment of internal dependency fears, paints a picture of a company that moved fast on a strategic bet and is now navigating the consequences in public. Microsoft was not a passive investor — it shaped OpenAI’s infrastructure buildout — but it also was not in full control of the entity it was backing.

The Verge’s trial coverage noted that other witnesses, including former OpenAI CTO Mira Murati via videotaped deposition and cofounder Ilya Sutskever in person, testified during the same week as Nadella.

What This Means

The trial testimony is the most detailed public account yet of how Microsoft’s leadership actually thought about its OpenAI relationship — and the picture is more anxious than the confident partnership Microsoft has presented externally.

Nadella’s April 2022 concerns about needing “agency at every layer of the stack” predate the public launch of ChatGPT by seven months. That timeline suggests Microsoft’s diversification efforts were reactive to internal risk assessments, not just market competition. The company has since built Azure AI Foundry as a multi-model platform, but OpenAI models remain the centerpiece of its consumer and enterprise Copilot products.

The Edge Copilot update is a useful product improvement, but it also illustrates the constraint: Microsoft is adding features to a browser AI assistant that runs on someone else’s model. Until Microsoft has credible proprietary model capabilities — or the OpenAI relationship is formalized in a way that removes uncertainty — the dependency Nadella described in court will remain a structural risk.

For investors, the 16% stock decline in 2026 alongside Ackman’s entry creates an interesting tension. The balance sheet argument is real, but balance sheets do not resolve model dependency or litigation risk on their own.

FAQ

What did Satya Nadella testify about in the Musk v. Altman trial?

Nadella testified that Elon Musk never raised concerns to him directly about Microsoft’s investment in OpenAI, and that he had worried as early as April 2022 about Microsoft becoming too dependent on OpenAI. He stated that having “real agency at every layer of the stack” had become a priority for the company.

What does the new Microsoft Edge Copilot feature do?

The updated Copilot in Edge can pull information from all of a user’s open browser tabs simultaneously, enabling cross-tab questions, product comparisons, and article summaries. Microsoft announced the feature on May 13 and is retiring the older Copilot Mode, folding its capabilities into the updated experience.

Why is Microsoft’s stock down in 2026 despite its AI investments?

Microsoft’s stock has declined 16% in 2026 while cloud peers have traded higher, according to CNBC. The underperformance appears linked to concerns about AI monetization timelines and broader market rotation rather than a fundamental business deterioration — a view reflected by Bill Ackman’s decision to open a new position in the stock in May 2026.