Microsoft Corp. has invested US$10 billion in OpenAI, whose AI tool ChatGPT has lit up the Internet since its introduction in November, amassing more than a million users in days and sparking a new debate about the role of AI in the workplace.
The new support, building on the $1 billion Microsoft invested in OpenAI in 2019 and another round in 2021, aims to give Microsoft access to some of the most popular and advanced AI systems. Microsoft competes with Alphabet Inc., Amazon.com Inc. and Meta Platforms Inc. to dominate the fast-growing technology that generates text, images and other media in response to a brief prompt.
At the same time, OpenAI needs Microsoft’s funding and cloud computing power to process massive amounts of data and manage the increasingly complex models that allow programs like DALL-E to generate realistic images based on a few words. and ChatGPT to create amazingly human-like conversational text.
Although Microsoft did not provide details of the new investment, a person familiar with the discussions, who spoke on condition of anonymity because the information is not public, said it totaled US$10 billion over several years. Shares rose 1 percent to $242.58 in New York on Monday.
The deal will boost Microsoft’s Azure cloud while providing OpenAI with additional, purpose-built supercomputers to run its complex AI models and fuel its research. Microsoft plans to use OpenAI’s models in consumer and enterprise products and launch new categories of products based on OpenAI’s work, the two companies said in blog posts.
The use of Azure fueled by that deal is key for Microsoft as it struggles to grow that business, Bloomberg Intelligence analyst Anurag Rana said. “It could even help Microsoft close the gap with AWS even more,” he said, referring to Amazon’s market-leading cloud service.
OpenAI noted Monday that it uses Microsoft’s Azure cloud service to train all of its models, and that Microsoft’s investment will allow it to accelerate its independent research. Azure will remain the exclusive cloud provider for OpenAI, the company said.
As with Microsoft’s previous investment in OpenAI, much of the value of the deal will take the form of Microsoft giving OpenAI the Azure cloud computing power it needs to run its AI systems, two people familiar with the deal said.
The deal has a complex structure as OpenAI investors are limited in their return on investment as it is a profit-limited company. Microsoft will receive almost half of OpenAI’s financial return until its investment is paid off up to a predetermined cap, one of the people said. All profits beyond what is owed to investors and employees are returned to OpenAI, which is managed by the non-profit organization OpenAI.
Microsoft earlier this month said it plans to add ChatGPT to Azure and announced the wide availability of its Azure OpenAI service, which has been an option for a limited set of customers since it was introduced in 2021. The service gives Microsoft cloud customers access to various OpenAI Tools such as the GPT-3.5 language system on which ChatGPT is based, as well as the DALL-E model for generating images from text prompts. This allows Azure customers to use OpenAI products in their own cloud-based applications.
Microsoft itself is currently using developer language artificial intelligence to add automation to its Copilot programming tool and wants to add such technology to its Bing search engine, Office productivity apps, Teams chat program and security software. The Redmond, Washington-based company puts DALL-E into design software and offers it to customers on the Azure cloud.
CEO Satya Nadella is deepening Microsoft’s ties to OpenAI as Google, long essentially untouchable in search, suddenly looks vulnerable. Alphabet’s prevailing keyword query model uses search engines to scour the web for specific terms and then allows users to make their own decisions about what information is useful.
In contrast, ChatGPT answers questions about topics such as political science and computer programming with detailed explanations, and its question-and-answer format means users can dig deeper until they fully understand. The bot is able to respond to queries in a natural and human way, leading a conversation and answering follow-up questions, unlike the basic list of blue links that Google search provides.
But ChatGPT has disadvantages compared to this old-school list of links. Unlike Google or Bing search, ChatGPT currently offers no context as to where the information used to construct its responses is sourced, and OpenAI acknowledges that the tool’s responses may be incorrect and should not be relied upon as accurate.
At $10 billion, the latest investment in OpenAI easily surpasses all of Microsoft’s investments to date, according to data compiled by Bloomberg, including $5 billion spent to buy shares of AT&T Inc. in 1999 in exchange for access to new cable networks, and the $1 billion stake he took in Comcast Corp. in 1997
The dollar amount would also exceed all but three acquisitions Microsoft has made in recent years. Microsoft is seeking antitrust approval to buy video game maker Activision Blizzard Inc. worth US$69 billion, and in 2016 spent US$26 billion to buy professional networking site LinkedIn. Last year, Microsoft completed its $20 billion purchase of Nuance Communications Inc., an artificial intelligence company specializing in voice recognition and related healthcare software and services.
News of the investment comes less than a week after Microsoft announced it was cutting 10,000 jobs as a weakening economy curbs demand for software. Microsoft noted in that announcement that it will still invest and hire in key priority areas. The software maker reported earnings for its fiscal second quarter on Tuesday.
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