Microsoft Invests $10 Billion in OpenAI, the Company Behind ChatGPT

Microsoft is investing $10 billion in OpenAI, whose artificial intelligence tool ChatGPT has become very popular since its introduction in November.

Within days of its launch, it had amassed more than a million users, sparking a new debate about the role of AI in the workplace.

Microsoft is investing more money into OpenAI in order to gain access to some of the most popular and advanced artificial intelligence systems. With this new investment, Microsoft is competing 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 short prompt.

OpenAI requires Microsoft's funding and cloud-computing power to process large amounts of data and run complex models that allow programs like DALL-E to generate realistic images based on a few words, and ChatGPT to create remarkably human-like conversational text.

Microsoft has made a new investment totaling $10 billion over multiple years, though no details have been given. The shares were up 1% at $242.71 at 10:39 a.m. in New York.

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

The Azure usage fueled by this deal is key for Microsoft as it battles to expand that business, said Bloomberg Intelligence analyst Anurag Rana. Rana believes that this could even help Microsoft close the gap further with AWS, Amazon’s market-leading cloud service.

OpenAI announced on Monday that it will be using Microsoft's cloud-based Azure service to train all of its models. Microsoft's investment will allow OpenAI to accelerate its independent research. Azure will remain the exclusive cloud provider for OpenAI.

Microsoft's investment in OpenAI will take the form of Azure cloud-computing resources, said two people familiar with the deal. This will give OpenAI the power it needs to run its AI systems effectively.

The deal has a complicated structure because investors in OpenAI are limited in the return on their investment. Microsoft will get nearly half of OpenAI's financial returns until its investment is repaid up to a predetermined cap. All profits beyond what is owed to investors and employees are returned to OpenAI, which is governed by the OpenAI non-profit organization.

ChatGPT is a chatbot that uses artificial intelligence to generate responses to questions. Some people believe that ChatGPT is a sophisticated robot that can hold intelligent conversations, while others believe that it is a machine that spreads misinformation.

Microsoft announced earlier this month that it plans to add ChatGPT to Azure and make the Azure OpenAI Service broadly available to customers. The service gives Microsoft cloud customers access to various OpenAI tools, including the GPT-3.5 language system that ChatGPT is based on, as well as the DALL-E model for generating images from text prompts. This enables Azure customers to use the OpenAI products in their own applications running in the cloud.

Microsoft is using AI to automate its Copilot programming tool and plans to add the same technology to its Bing search engine, Office productivity applications, Teams chat program and security software. The company is putting DALL-E into design software and offering it to Azure cloud customers.

Satya Nadella, CEO of Microsoft, is deepening the company's ties with OpenAI in light of Google's sudden vulnerability. Google has long been essentially untouchable in the search engine market, but its model of keyword queries appears to be faltering. With Microsoft's help, OpenAI may be able to provide a more effective search solution that can compete with Google.

ChatGPT is able to provide detailed explanations to questions about topics such as political science and computer programming. Its question-and-answer format allows users to get the information they need. The bot is capable of responding to queries in a natural and human-like manner, carrying on a conversation and answering follow-up questions. This makes it much more useful than a basic list of blue links from a Google search.

ChatGPT has some disadvantages compared to a traditional search engine like Google or Bing. For one, ChatGPT doesn't offer any context about where it sourced the information used to build its answers. Additionally, the responses from ChatGPT can sometimes be incorrect, so it's not a tool that should be relied on for accuracy.

OpenAI's latest investment of $10 billion easily surpasses any of Microsoft's previous investments, according to data from Bloomberg. This includes the $5 billion Microsoft spent to buy AT&T stock in 1999 in exchange for access to new cable networks, and the $1 billion stake it took in Comcast in 1997.

The proposed acquisition of TikTok would be one of the largest in Microsoft's history, topping all but three of the company's previous acquisitions. If approved, the deal would give Microsoft a major presence in the social media and video-sharing space. TikTok has been a huge success in recent years, with a large and growing user base. The acquisition would give Microsoft a valuable new platform to reach consumers and businesses.

Microsoft's announcement of a new investment less than a week after announcing layoffs of 10,000 workers shows the company's commitment to invest in key areas despite a weakening economy. Microsoft will report its fiscal second-quarter earnings on Tuesday.