HomeBusinessMicrosoft Invests $10 Billion in ChatGPT Maker OpenAI

Microsoft Invests $10 Billion in ChatGPT Maker OpenAI

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Microsoft Invests $10 Billion in ChatGPT Maker OpenAI
Microsoft Invests $10 Billion in ChatGPT Maker OpenAI (Image: Getty Images)

Microsoft is investing $10 billion ($14 billion) $US in OpenAI, whose artificial intelligence tool ChatGPT has lit up the internet since its introduction in November, racking up more than a million users in a matter of days and sparking a new debate about AI’s role in the workplace.

The new support, based on $US1 billion Microsoft invested in OpenAI in 2019 and another round in 2021, is meant to give Microsoft access to some of the most popular and advanced AI systems.

Microsoft is competing with platforms Alphabet, Amazon.com, and Meta to dominate fast-growing technology that generates text, images, and other media in response to a brief warning.

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At the same time, OpenAI needs Microsoft funding and cloud computing power to process massive volumes of data and run the increasingly complex models that allow programs like DALL-E to generate realistic images based on a handful of words, and ChatGPT to create astonishingly human conversational text.

While Microsoft did not give details of the new investment, a person familiar with the discussions, who asked not to be identified, said it amounts to $US10 billion over several years. The shares gained 1 percent to $US242.58 in New York on Monday (Tuesday AEDT).

The deal will give a boost to Microsoft’s Azure cloud while providing OpenAI with additional supercomputers specially designed to run its complex AI models and fuel its research. Microsoft plans to use OpenAI models in corporate and consumer products and launch new product categories based on OpenAI’s work, the two companies said in blog posts.

The use of Azure driven by this deal is key for Microsoft as it struggles to expand that business, said Bloomberg Intelligence analyst Anurag Rana. “This could even help Microsoft further close the gap with AWS,” he said, referring to Amazon’s market-leading cloud service.

The deal has a complicated structure because investors in OpenAI are limited in the return on their investment, as it is a for-profit company.

Microsoft will get nearly half of OpenAI’s financial returns until its investment is paid off up to a predetermined limit, one of the people said. All profits beyond what is owed to investors and employees are returned to OpenAI, which is governed by the non-profit organization OpenAI.

Earlier this month, Microsoft said it planned 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.

Microsoft is currently using developer language AI 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 company is putting DALL-E into design software and offering it to Azure cloud customers.

Human-like manner

CEO Satya Nadella is deepening Microsoft’s ties with OpenAI as Google, which has long been essentially untouchable in search, suddenly looks vulnerable.

The predominant model of alphabet unit keyword queries uses search engines to comb the web for specific terms and then allows users to make their own decisions about what information is useful.

In contrast, ChatGPT answers questions on topics like political science and computer programming with detailed explanations, and its question-and-answer format means users can drill down until they fully understand.

The bot can respond to queries naturally and humanly, hold a conversation, and answer follow-up questions, unlike the basic list of blue links that a Google search provides.

But ChatGPT has downsides compared to that old-school link list. Unlike a Google or Bing search, ChatGPT currently offers no context on where you got the information used to build your answers, and OpenAI acknowledges that the tool’s answers may be incorrect and should not be considered accurate.

At $US10 billion, the latest investment in OpenAI easily surpasses any of Microsoft’s investments to date, according to data compiled by Bloomberg.

The dollar amount would also exceed all but three acquisitions Microsoft has made in recent years. Microsoft is seeking antitrust approval for a $US69 billion purchase of video game maker Activision Blizzard and in 2016 spent $US26 billion to buy professional networking site LinkedIn.

Last year, Microsoft completed its $US20 billion purchase of Nuance Communications, an artificial intelligence company specializing in speech recognition and related software and services in the healthcare field.

News of the investment comes less than a week after Microsoft said it will lay off 10,000 workers as a weakened economy reduces demand for software. Microsoft said in that announcement that it will continue to invest and hire in key priority areas. The software maker reports fiscal second-quarter earnings on Tuesday.

Source: Bloomberg


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